Means Test in Chapter 7 and Chapter 13 Bankruptcy
Do you Qualify to File for Bankruptcy?
Bankruptcy Attorneys in Chattanooga
When a filing bankruptcy either Chapter 7 or Chapter 13, part of the process of determining a debtor’s eligibility is the “Means Test“. In a Chapter 7 bankruptcy the official document is entitled “Chapter 7 Statement of Current Monthly Income and Means Test Calculation”
The chapter 7 means test is a multiple step process. The first step is to determine the income of the Debtor and spouse, even if the spouse is not filing bankruptcy. The calculation period for income is the six complete calendar months prior to filing the bankruptcy petition. The six months income is then annualized and compared to the median income for the Debtor’s household size (number of persons in household including children). If the Debtor’s annual income as calculated is below the median income then the means test is complete and the presumption of bankruptcy abuse does not arise. In other words, the person qualifies to file a Chapter 7 bankruptcy petition.
If the income as calculated is above the median income the second step must be completed which involves the analysis of monthly expenses. In the expense step of the means test, both actual expenses (like taxes and insurance) and standard expense deductions from the Internal Revenue Service are utilized. Monthly expenses for secured debts like a home mortgage or car loan are only calculated if the debtor intends to reaffirm the loan and keep the secured property.
After calculating the expenses, the determination must be made as to the amount of “disposable income” is available to the Debtor over a sixty month period. This analysis is a comparison to a Chapter 13 bankruptcy. If there is significant disposable income available then the presumption of bankruptcy abuse arises, and the debtor generally will not be allowed to file a Chapter 7 bankruptcy.
Warning!
Make sure to have a bankruptcy attorney to complete the means test
Warning!
Make sure to have a bankruptcy attorney to complete the means test The Chapter 7 means test involves very complex and precise calculations which need to be performed by a bankruptcy attorney. There are many restrictions and guidelines which must be followed when reporting the income and expenses on the statement of current monthly income and means test calculations form. Be sure to discuss your income and expenses in detail with your bankruptcy lawyer so that this form may be completed accurately and avoid any negative repercussion, including potential criminal charges.
The Chapter 13 Bankruptcy Means Test is a little different then the chapter 7 means test. The goal of the chapter 13 means test is to determine the appropriate length of the chapter 13 plan and the ability to repay your debts and still pay normal living expenses.
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