The Means Test And Bankruptcy

Whether you need relief from crippling debt, you have had unexpected medical expenses or you just made poor financial decisions, you may be able to make a fresh financial start with bankruptcy. If you are considering filing for bankruptcy, you should know that there are certain rules that regulate whether or not you are eligible to file. Bankruptcy courts take a hard look at your income and your ability to repay your debts before they allow you to declare bankruptcy. You must past the income requirements, and if if not, you must past the means test. For an explanation of these requirements, read on.

Income Requirements

The courts presume that if you have income above the median income level for your state, you have enough income to pay your debts. The median income levels can be found here. If you have a higher-than-median income, you may still be able to file chapter 13 bankruptcy, which has no income limits. Chapter 13 is a debt reorganization plan in which you gradually pay your debts off over a stretched-out period time. However, if you still want to file chapter 7, you may be able to file if you can pass the means test.

The Means Test

This means test allows you to still qualify to file for chapter 7 with a higher income if you also have sufficient expenses. It should be noted that the means test is not necessary if your income is below the state median. Certain expenses are deducted from your income, and the remainder is called disposable income, which must be under a certain amount to qualify. The means test looks at your last six months of income and allows you to deduct for expenses like housing and transportation.

The means test is included in your packet of paperwork that will make up your official petition for bankruptcy. Here is what the form, Form 22-A, looks like. An online calculator function by state may be found here.

Being able to qualify for chapter 7 bankruptcy filing is only one hurdle of several you will need to to leap on your way to a financial fresh start. Make sure that you have a bankruptcy expert on your side by discussing your situation with a bankruptcy attorney such as Richard S. Ross - Bankruptcy Attorney. It's important to get specific state information when it comes to bankruptcy, and your bankruptcy attorney is just the person for the task.