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Means Test For Chapter 7 Bankruptcy

A means test is necessary before filing for Chapter 7 bankruptcy. The means test aims to determine your ability to repay your debts.

Basically, the test looks at your debts, household expenses, and income with the aim of determining if you have any disposable income that you can use to pay your debts over time, as opposed to having the courts wipe the slate clean.

The trustee who conducts the test starts by reviewing your current monthly income statement and weighs it against your expenses. While at it, they consider various factors such as:

• Your average monthly expenses for a household of your size
• Your actual expenses
• Credit card debts
• Your household income and annual income from all sources

• Your family and household size
• Extraordinary expenses such as healthcare and childcare
• Prior efforts you have taken for debt relief

The court will require a copy of your tax returns and other types of IRS paperwork. This will help the trustee to gauge your earning potential and compare it to your actual income.

The means testing process can be divided into two main steps:

1. Comparison Of Income To State Averages:
   In the first part, the trustee will compare your income from the last six months before filing and your state’s median family income.
   If your income is lower or equal to the state median, you can proceed to file. If not, you may need to pursue other alternatives with your Chapter 7 bankruptcy lawyer, such as converting your bankruptcy filing to Chapter 13.
2. Comparing Disposable Income
   If you have a more than median income, the trustee proceeds to the second part of the means test. They will consider how much disposable income you have after paying the acceptable expenses.

Even if you fail the means test, you can still file for bankruptcy under Chapter 7. However, you will need the assistance of your bankruptcy lawyer to make your case and establish special circumstances that would necessitate your case to be filed under Chapter 7 despite failing means testing.

Income And Debt Requirements For Chapter 13 Bankruptcy

You may not have to take a means test for Chapter 13 bankruptcy, but you still have to meet specific eligibility requirements to be able to file for Chapter 13 bankruptcy. These requirements include:

Credit Counselling

You must take credit counselling before filing under this bankruptcy case. You can be exempted from this requirement if:

• Your Chapter 13 bankruptcy lawyer files a different certificate describing extenuating circumstances that may merit the waiver of this requirement.
• If you request and provide notice that the debtor is unable to obtain credit counselling because of a disability or incapacity.

Sufficient Income

You must show that you have enough disposable income to meet the amount stated in your repayment plan. If you have a spouse, you can file Chapter 13 bankruptcy even if the income is not directly yours. Although you can use money from a spouse as a source of income, you still have to file alone.

Current Tax Filings

You must submit proof that your tax filings are current. You should provide proof that you have filed state and federal taxes in the four years preceding the filing. The court may grant time if you need to get current on your filings.

Giving Our Clients A Fresh Start In Los Angeles County, CA

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Are you tired of creditors calling your phone all the time? We know it can be a stressful experience. That is why we are here to help our clients in Los Angeles County, CA, file for Chapter 7 and Chapter 13 bankruptcy. As an experienced bankruptcy lawyer near me, we understand the filing requirements, and we can help you prepare for the process.

Our extensive knowledge in the law and business world also makes us an ideal small business bankruptcy lawyer. With our help, you can put your debt nightmares behind you and start a new life. To get started, you can give us a call at (818) 514-1355 to schedule a free consultation.