Legal Guidance For The Bankruptcy Means Test
The bankruptcy “means test” is a complex, multistep calculation that determines your eligibility for Chapter 7 or the structure of a Chapter 13 plan. Because this process involves intricate government standards and detailed financial reviews, navigating it alone can lead to overwhelming stress and costly mistakes.
The legal team at Ward & Spires, LLC can help explain the process and provide clarity on your best path forward. Our attorneys have experience guiding clients throughout Georgia through these difficult requirements and will work closely with you to help better ensure you have prepared all of the necessary documentation and do not miss important deadlines.
The Basics Of The Means Test
In 2005, Congress made a sweeping change to the bankruptcy law through BAPCPA. Among the numerous changes was the addition of a means test to determine your eligibility to file a Chapter 13 bankruptcy or a Chapter 7 bankruptcy. As a general overview, the means test is a government assessment that takes into account the county of your residence and the number of individuals who live in your household (family size), setting a gross annual revenue amount that would allow you to either file a three-year Chapter 13 (minimum amount of time in Chapter 13 is 3 years) or a mandatory five-year Chapter 13 case and which would determine if one is eligible to file a Chapter 7 at all.
There are stages to the means test. It requires you to provide proof of the last six months of pay with paycheck stubs or, if self-employed, your operating account, to determine an average income. Certain income is exempt from calculation such as Social Security payments and unemployment benefits. After determining the average income, the government provides a chart that will list how much income a family of your size can make each year. If you are under the amount, you have passed the means test and can go forward with filing a Chapter 7 or a Chapter 13 of either three, four or five years. Basically, if you pass the means test for Chapter 13 purposes, you can decide the length of time of your bankruptcy case. If you are over the amount, you are in a mandatory five-year Chapter 13.
Now, in a Chapter 7 case, if your income is higher than what the government figure is for your family (household) size, you still may qualify for Chapter 7. You must complete the second part of the means test to determine your disposable income, taking into account expenses such as car payments, house note(s), secured debts, tax payments and numerous other deductions. Upon listing all the deductions, if the amount of disposable income that remains is less than the amount required by the government, you could pass the means test and still be eligible to file. This figure generally cannot be determined without sitting down with an attorney at the firm so the amounts can be calculated. Again, this is an attempt to explain a very complex form that must be completed accurately with the assistance of the client and proof of their earnings for the six months prior to filing a bankruptcy case.
We Can Help You Find A Path Forward
Our experienced bankruptcy attorneys can review this process and discuss your options with you. Call us at 706-250-7797 to schedule a consultation.
We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.