My Road Back From Bankruptcy

Posted on: 25 March 2018

Bankruptcy provides a unique opportunity to turn your financial picture around and start fresh. There is really nothing like the feeling of relief and hope that come with a chapter 7 filing, and anyone can get these benefit as long as they qualify to file. One of the main sticking points with filing for chapter 7 is the means test. Read on for what you need to know about this important bankruptcy issue.

Your Income

At one time, income was no consideration for filing bankruptcy; anyone who had debt could file. The problem is that anyone did file, and repeatedly so. The bankruptcy courts had to take action to keep well-off people from abusing bankruptcy, so a test to evaluate a filer's ability to pay their debts without declaring bankruptcy was created. In other words, if a filer has the "means" to pay their bills, why should they declare bankruptcy?

Median Income

Every state has a different standard of living, and each one has what is known as the state's median income. This an average of salaries based on tax information for that state. The median income can vary widely, with it being much higher in Maryland and much lower in Mississippi. When you "declare" bankruptcy, you are declaring that you cannot pay your bills at your current income level.

Means Testing

Don't worry; there's no studying required for this test. Instead, the means test is included in your bankruptcy package of paperwork to be filled out and filed with the federal court. Look for Form 22-A when you complete your forms, though your bankruptcy attorney will actually complete the form using the information you provide. This form requires the filer to list all income and all expenses and then compares those figures with that of the median income where you are a resident. The reason for the listing of the expenses is that it allows some deductions to be made to your income, which could mean that you may qualify to file even if your income is too high for your state.

Try It On For Size

There are ways to test drive the means test, but caution is urged. When it comes to qualifying for a bankruptcy filing, there is no way to know for sure without speaking to a bankruptcy lawyer. There are just too many factors that go into means testing to rely on an online calculator, so it should be used for a ballpark determination of means only.

To get the real information about your income, expenses and filling for a chapter 7, speak to a bankruptcy attorney like Clinger Richard S   as soon as possible.