Bankruptcy Means Test
Congress published new bankruptcy laws in 2005 and they created new forms, including the Means Test in a Chapter 7 bankruptcy. The means test is supposed to tell the court whether or not you have enough disposable income left after paying your necessary living expenses to pay at least some amount to your creditors in order to settle your debts, rather than wiping them out. The means test has to be finished along with credit counseling and a personal financial management course.
Your income and expenses are listed on the means test and them compared to averages for your area and family size. If you are a disabled veteran or most of your debt is not consumer debt, you only have to complete a portion of the means test. The means test presumption of abuse signifies that you may have enough income to pay your debts. If the presumption does arise at the end of the means test you may be forced to file a Chapter 13 bankruptcy.
You will list your income on the second part of the means test. The third section will determine your average yearly income and compare it to the median family income based on the state you live in, and the size of your family. If you have a higher income than the other families, you must continue filling out the means test, if it is less, then the presumption does not arise.
Next you’ll subtract living expenses for your family size and location, these include food, housing, automobile, utilities and other expenses.
In part six the deductions listed in part five are calculated and used to determine how much disposable income you have left over. The presumption does not arise if you have under $6575 a year leftover, if you have more than $10,950, the presumption arises, if your disposable income is in-between there, then you have to continue the form to compare your unsecured debt to your left over income.
The bankruptcy means test is confounding, so conferring with a bankruptcy attorney is always a good option before you file bankruptcy.
Comments Off