What is the Bankruptcy Means Test?
Many people face serious problems with debt. One small event or emergency has the potential to create situations where these people are unable to keep up with the payments on these debts. This can create further complications with that debt and may have devastating effects on their credit ratings. Low credit ratings cause issues in many aspects of a person’s life. It can prevent them from getting further credit. It can also have an impact on getting a job or even renting a home. Fortunately, there are methods available for gaining control of one’s debt.
Bankruptcy is an option available for people to gain control of their finances. Chapter 13 Bankruptcy provides a method for restructuring debt. A repayment plan is made that provides an affordable method for people to get their debt under control. There is also Chapter 7. This option is for those with little or no income. This type provides a process to allow debtors to discharge their debt. However, applicants must pass the Bankruptcy Means Test to be eligible for a Chapter 7.
The Bankruptcy Means Test
The Bankruptcy Means Test is a process designed to limit those applying for Chapter 7 to only those who are unable to afford their debt. This test takes into consideration the monthly income of the applicant over the last six months before filing. If the income is less than the median income for the state, the person qualifies for the Chapter 7. No further income evaluation is necessary.
If Income is Over Median Income
If a person’s income is over the median income for the state, then other factors will be considered. The test determines certain expenditures that are necessary each month. There are deductions from the household’s monthly income for expenses, such as home costs, health insurance costs, food, clothing, and utilities. Once all of these costs are determined and subtracted from the household’s income, the remaining balance is considered the household’s disposable income. If this amount is below a certain amount, then the applicant would qualify for the Chapter 7 process. However, if it does not, Chapter 13 would be their best option for managing their debt.
Certain Bankruptcy Means Test Exclusions
There are some situations where a person can be excluded from the Means Test. Disabled veterans and certain members of the military are exempt from the Means Test when applying for Chapter 7. A specific form must be completed and submitted with the application for the filing process.
Getting Help with the Bankrtupcy Process
The bankruptcy process can be quite confusing for many people unfamiliar with the forms and processes required for these court proceedings. Fortunately, our team of Long Island bankruptcy attorneys are available to help every step of the way. An Attorney experienced in bankruptcy is able to provide all the information necessary for a person to determine if this is the best option for them.
Our attorneys provide assistance in completing the Means Test for those trying to determine the best option for them. Your lawyer will help applicants collect all the information needed to properly complete the means test. If they are eligible for Chapter 7, your attorney will assist the applicant in collecting all of their information regarding any money owed to submit to the courts. Your lawyer will also assist in completing all filings and attend the court process to ensure they receive the discharge of their debts. Following the completion of your bankruptcy case, our team can also assist with credit repair.
Failing the Means Test
If the applicant fails the means test, your attorney can assist the applicant in the process of the Chapter 13 bankruptcy. The Chapter 13 process provides applicants with a repayment option that they can afford over the next three to five years. Once the repayment plan is complete, any remaining money owed may be discharged.
Legal assistance is very beneficial when filing any type of bankruptcy plan with the court. Your attorney will provide assistance to ensure the applicants rights are protected and they reach a plan that is right for them. Once the bankruptcy is complete, people are better able to gain control of their finances and start fresh.
For more information on the bankruptcy process, including the bankruptcy means test, please contact The Law Offices of Adam C. Gomerman today.