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!

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