When It Comes to Income, Timing is Everything
A basic reality of bankruptcy practice is that debtor income can and does change rapidly. In the BAPCPA environment, an attorney has to be ready to respond to a debtor's change in circumstances. Under BAPCPA 101(10)(A), debtor's income is determined by taking the total income over the last six months and dividing by six (the average monthly income).
If your client notifies you of a sudden increase in income, a quick filing may be in your client's best interest. If you wait two months after the income change, the six-month average may increase by enough to bring your client above the median income for the debtor's household, triggering application of the means test. You may want to file quickly. Of course, keep in mind that you also have to file a disclosure of reasonably anticipated increases and could draw an objection based on a bad faith filing.
Conversely, if your client has a sudden decrease in income, before filing, you should reassess whether the means test applies. By waiting a month to three months, the debtor's six-month average income may decrease by enough to eliminate the application of the means test. Remember that, in any event, the debtor's income has to be reassessed the day before filing to determine an accurate income figure. Any time the means test applies, examine if the debtor will experience a change in circumstances that could affect your advice about when to file the bankruptcy case.
Plus don't forget you have to send them off to credit counseling first.