Taking a means test is one of the first things you need to do when considering filing for bankruptcy. This can help determine what type of bankruptcy you are eligible for and which is best for your unique situation. Here’s what you need to know about the bankruptcy means test.
Can You File a Chapter 7?
For many people, a Chapter 7 bankruptcy is the most desirable type of bankruptcy, because it allows for unsecured debts to be discharged completely. A Chapter 13 bankruptcy, on the other hand, requires for you to pay back all of your debts over the period of 3-5 years.
However, not everyone can qualify for a Chapter 7 bankruptcy. The courts won’t erase your debts if you make too much money. A means test is designed to prove that you have a high debt and a low income, and filing for a Chapter 13 bankruptcy would be an undue financial burden on you while you are already struggling.
The means test will evaluate your income to debt ratio to determine if you have enough disposable income to pay back some or all of your debts on a reasonable repayment plan. If you do not, you pass the means test and can file a Chapter 7 bankruptcy.
Under What Circumstances Does Someone Not Have to Take the Means Test?
There are certain circumstances in which a person filing for bankruptcy may not have to take the means test.
If your income is less than the median income for a family of your size in your area, you automatically qualify for a Chapter 7 bankruptcy and do not have to take the means test. This is by far the simplest way to qualify for a Chapter 7 bankruptcy; however, you may still be able to file even if your income exceeds the median for your family size in your area.
When to Contact a Bankruptcy Attorney
The most important thing you can do before you take any step to file for bankruptcy is to consult with an experienced bankruptcy lawyer. Although there are numerous DIY forms online that promise to help you complete a bankruptcy without the expense of an attorney, this almost always gets a family into even more financial trouble when the bankruptcy is not done correctly.
At the Law Office of Ted Williams Jr., we can guide you through the process of completing a means test and filing for bankruptcy step by step. Call now for a consultation at (205) 623-4443.