The Means Test
File Chapter 7 in Oakland
If you are planning on filing for
Chapter 7 bankruptcy, you need to take the means test. This is a test that determines
whether or not you can actually pay back your debt. If you pass the means
test, this means you cannot afford to pay back creditors and you are eligible
to file for Chapter 7 bankruptcy. In this form of
bankruptcy, debtors can usually get most or all of their debts discharged, though
they may have to have certain assets liquidated so that creditors can
be repaid. If you do not pass the means test, this means that you can
afford repayment and you are not eligible for Chapter 7 bankruptcy. Debtors
who don't pass the means test may still be eligible for
Chapter 13 bankruptcy, which involves repaying debt under a more manageable payment
plan for a few years and then having the rest of the debt discharged.
In order to pass the means test, a debtor must either have a monthly income
that is below the state median, or he or she must have disposable income
that is below a certain level. If you are getting ready to file for bankruptcy,
one of our Oakland bankruptcy attorneys at The Bankruptcy Law Firm can
help you apply the means test so you can be certain of which type of bankruptcy
you are eligible for. This is a crucial step, considering that you could
run into problems later on if you file for Chapter 7 bankruptcy when you
do not actually qualify for it.
How the Means Test Works
The first part of the means test is fairly straightforward. It simply requires
determining whether the debtor's current monthly income (as defined
under U.S. bankruptcy law) is below the state's median household income
for the debtor's household size. If it is, the debtor is eligible
to file for Chapter 7 bankruptcy. If the person's income is above
the state median, the debtor will have to apply the second part of the
means test to determine whether he or she qualifies. (Even debtors with
higher income levels may be eligible if they have significantly high expenses.)
In the second part of the test, certain qualified monthly expenses are
subtracted from the debtor's current monthly income to measure the
individual's disposable income. If the debtor's disposable income
is below a certain threshold, he or she can file for Chapter 7 bankruptcy.
If the disposable income is above the threshold, the debtor is limited
to Chapter 13 bankruptcy, if he or she qualifies for it.
Looking for a lawyer for your Chapter 7 bankruptcy in Oakland?
Debtors should keep in mind that even if they qualify for Chapter 7 bankruptcy,
this may not be the best solution for them, depending on their circumstances.
There are various factors that should be taken into consideration before
a debtor files for bankruptcy, which is why it is so critical to consult
with a bankruptcy attorney. Whether you need assistance with the means
test or some other aspect of the bankruptcy process, you can turn to The
Bankruptcy Law Firm for high-quality legal counsel.
Contact our firm so we can help you get started on the path to financial freedom - (510) 270-2782!