If you are overwhelmed with debt that you simply cannot begin to pay off, you might be considering the possibility of filing for bankruptcy to obtain some relief. However, if you cannot pass the means test and are considered a high-income earner, you will not be able to file for a Chapter 7 bankruptcy. This does not mean you will not be able to file for bankruptcy at all. Instead, if you fail the means test, you will still qualify to file a Chapter 13 bankruptcy, which allows you to repay a portion, or all, of your debts.
How the Chapter 7 Means Test Works
So how is the means test used to determine whether you are able to file a Chapter 7 bankruptcy or not? It will deduct specific monthly expenses from the income you earn every month, ultimately providing your monthly disposable income. The greater your disposable income is, the more likely you will not qualify for a Chapter 7 bankruptcy. If you are a high-income earner, you will be expected to repay your creditors with your disposable income.
Only filers who primarily have consumer debts, rather than business debts, will have to take the means test. In addition to determining disposable income, the means test will also determine if your income is greater or less than your state's median income. The more dependents and larger family size you have increases the amount of money you can earn and still possibly qualify for a Chapter 7 bankruptcy. If you are above the median, you need to complete the next step and determine if you would have enough disposable income left after subtracting certain expenses. If you are below the median, you will not have to proceed any further since this is enough to qualify you for a Chapter 7 bankruptcy.
If you are unsure where to begin or how to take the means test, try the fillable forms that are available on the U.S. Bankruptcy Court’s website. The forms you will want to use include:
- Form 122A-1: Determines if your income is below the state’s median
- Form 122A-2: If you were above the state’s median, use this to determine if you qualify by calculating your disposable income
- Form 122A-1Supp: Some members of the military are not required to take the means test, so fill this form out to find out if you are exempt
Additionally, hiring a bankruptcy attorney will help you execute each step with more accuracy, ensuring that you make the right decisions for your circumstances.
Passing the Means Test
If you pass the means test, this does not necessarily mean you are automatically qualified to file for a Chapter 7 bankruptcy. The court will examine additional forms to determine your eligibility. Moreover, just because you qualify for a Chapter 7 bankruptcy, does not mean this is the best option for you. That is why it is vital to hire a bankruptcy attorney as soon as possible.
Bankruptcy Attorneys in Brevard County
At The Buchalter Law Group, our bankruptcy attorneys in Brevard County have more than 35 years of experience in helping individuals overcome insurmountable debt. If you are considering bankruptcy as an option to relieve your debt problem, you need an experienced attorney to help you effectively navigate this process, getting you off to a proper start toward a better and brighter financial future.
Call our office today at (321) 320-6088 to get started. We provide free case evaluations.