Chapter Seven Bankruptcy Means Test
Congress released new bankruptcy laws in 2005 and they produced new forms, including the Means Test in a Chapter 7 bankruptcy. The courts created the means test in order to see if you have enough available income to pay your debts, rather than wiping them out. You are expected to complete this paperwork as well as the other changes that were ordered like the pre-bankruptcy credit counseling and post-bankruptcy personal financial management courses.
Consisting of 57 questions, the means test lists your income and expenses and compares them to national and local norms for your family size. If you are a disabled veteran or most of your debt is not consumer debt, you only have to complete a portion of the means test. The means test presumption of abuse signifies that you may have adequate income to pay your debts. If the presumption does arise at the end of the means test you may be pushed to file a Chapter 13 bankruptcy.
The second section will determine your income. You, and possibly your spouse, depending on how you plan on filing bankruptcy, will answer questions on your gross wages, business income, rental/property income, interest/dividends earned, child support, pension and any other income, averaged for the last 6 months. The third section will determine your average yearly income and compare it to the median family income based on the state you live in, and the size of your family. If you have a higher income than the other families, you must keep filling out the means test, if less, the presumption of abuse does not arise and you are done.
In part five you will deduct standard expenses for your family based on regional numbers the government has declared as acceptable for your area and family size, such as groceries, mortgage or rent, utilities and your car.
The final part is determing how much money you have left over each month. The presumption does not arise if you have under $6575 a year leftover, if you have over $10,950 the presumption does arise, and if you have somewhere inbetween $6576 and $10,949 you must proceed with the means test form which compares the amount of unsecured, non-priority debt you have with your disposable income.
The bankruptcy means test is confusing, so consulting a bankruptcy attorney is always a good option before think about filing bankruptcy.
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