To file for Chapter 7 bankruptcy, you'll need to pass a means test. This is used to determine if you have the means to pay your debts or if you really qualify to file for Chapter 7 bankruptcy.
The Rationale of Chapter 7 and Means Tests
The purpose of a means test is to make sure that those who have the means to pay off their debts do not qualify. Instead, they will be required to file for Chapter 13 bankruptcy and pay some or all of their debt owed. The bankruptcy test will determine if you fall below the median income for you or for someone with your family's size. You can also determine if you have any exemptions to the means test.
Documenting Your Expenses
You will also have to gather documentation regarding your expenses. Your expenses will need to be allowed expenses. Make sure to be very thorough and do not omit important details because you'll be more likely to have your case thrown out. This can be the longest and most involved part of the process, and you will want to be completely honest when working with your attorney. The type of expenses you are allowed to have is based on both local and national standards determined by the Federal government. With the help of your lawyer, you'll be able to have all your expenses documented.
Chapter 7 and a Disposable Income
Even if you have a disposable income and the disposable income is low enough, you will still qualify for Chapter 7 bankruptcy. However, with a larger disposable income, the courts will instead expect you to use that income to pay down your debts.
Chapter 7 Calculations
Sometimes, the calculations for the means test are very straightforward. In other cases, the calculation for the means test can require several steps that you'll need to be walked through by your attorney.
Avoiding the Means Test
If you are not interested in the means test, you'll fortunately be able to avoid the test if all of your debts are related to taxes, if you are a reservist or a National Guard Member, if you are a disabled veteran, or if your debt is entirely non-exempt.
Because it is very important that you pass the bankruptcy means test, make sure to work with a bankruptcy attorney who can make sure that you know everything that must be done to pass the test. For more information, consult with a law firm like Merna Law.