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The means test was designed for limiting the use of Chapter 7 bankruptcy for those who cannot pay their debts on time. It does this by deducting specific monthly expenses from one’s current monthly income (the average income over the last 6 calendar months before filing for bankruptcy) to arrive at the monthly disposable income.
The higher is the disposable income, the more likely will one be not allowed to use Chapter 7 bankruptcy. Instead, the person will be expected to use their disposable income for repaying their creditors.
Only those bankruptcy filers coming with primarily consumer debts need to take up the means test. The first step of the same is determining whether one’s income is less or more than their state’s median income. If the earnings are more than the median, then the concerned person must figure out whether he/she would have enough left over, after subtracting certain expenses, to repay some of the pending debt.
Your Income and the Median
The first step is quite simple: If one’s current monthly income is less than the median income for a household of the same size, in the same state, they pass. Then he /she does not require completing the rest of the means test. He/she can easily file for Chapter 7.
Is your disposable income enough for repayment?
For the people having a household income that exceeds the state median, the means test computations get a bit complicated. The concerned person must determine whether they have enough disposable income left over, after paying for the allowed monthly expenses, to pay off at least some portion of the unsecured debts (like credit card bills). If the disposable income adds up to more than the amount, then he/she fails the means test and cannot avail of a discharge by filing for Chapter 7 bankruptcy.
Median income levels vary according to state and household size. Each county and their respective metropolitan region have different allowed amounts for expense, necessities, transportation, housing, and other related categories.
Chapter 7 Means Test Forms Usage
If you are searching for a way of determining your eligibility under the Chapter 7 means test, try to fill out the means test forms. Downloadable and ready-to-fill forms are available online on the U.S. Bankruptcy Court’s official website. Follow the instructions that are mentioned.
Here is the process
Form 122A-1. The first means test form determines whether the income is below one’s state’s median income or not. If it is then he/she will qualify for a Chapter 7 bankruptcy and do not have to fill out the other two forms.
Form 122A-2. If one’s income is above the state median, he/she hold a chance to qualify. They can find out by completing this form where the deduction is allowed for expenses and determining whether one has sufficient disposable income to pay in a bankruptcy plan or not.
Form 122A-1Supp. Some people do not have to take the means test at all. To find out, one has to fill out this very form. Visit the official website of the US Court for the most recent versions of their official bankruptcy forms.
Filling this form is quite a technical task and it gets better when some expert handles the same. Contact Tucson Chapter 7 Attorneys and sit hassle-free.
Passing the Chapter 7 Means Test
One should be aware that just passing the means test does not automatically qualify you to file for Chapter 7 bankruptcy. Another step exists in between. The court will inspect two additional forms: Schedule I and J based on income and Expenses respectively. If one has enough remaining income to pay something to the creditors after deducting the actual monthly expenses from their current monthly income, the court might switch their Chapter 7 case to a Chapter 13 bankruptcy.
Also, just for the reason that you qualify under the means test does not necessarily imply that you should file for Chapter 7 bankruptcy it only implies that you can. Your decision of filing for the Chapter 7 bankruptcy should be made after appropriately considering factors not discussed in this article. Chapter 7 Bankruptcy Attorney Tucson will help you with the same.
just for the reason that you qualify under the means test does not necessarily imply that you should file for Chapter 7 bankruptcy it only implies that you can. Your decision of filing for the Chapter 7 bankruptcy should be made after appropriately considering factors not discussed in this article. Chapter 7 Bankruptcy Attorney Tucson will help you with the same.
Not Passing the Chapter 7 Means Test
If one fails to pass the means test, then he/she is limited to using Chapter 13 bankruptcy, which requires them to make monthly payments over a three- to five-year period in accordance with a strict court-monitored budget. Most people filing for bankruptcy prefer Chapter 7, which requires no repayment. However, Chapter 13 bankruptcy is still counted as the best way of handling specific problems, like curing a default on a mortgage and repaying debts that would not go away in bankruptcy. Contact Tucson Bankruptcy Lawyer @ Yusufov Law Firm in Tucson OR Call on +1 (520) 745-4429.
