Use Total Lawyers to get an idea about the Chapter 7 Means Test, or contact us now by calling 877-421-3761 or completing our free bankruptcy evaluation form. We'll put you in touch with a bankruptcy attorney in your area who can be a resource for the information you need.
In October 2005, new bankruptcy legislation was enacted. One of the requirements outlined by the laws was that anyone who wanted to file for Chapter 7 bankruptcy must first pass a Chapter 7 means test.
The Chapter 7 means test determines, through various calculations, whether or not you are financially capable of making creditor payments necessary for a Chapter 13 bankruptcy filing. If you do not have the means to do so, you qualify for Chapter 7 bankruptcy.
The Chapter 7 Means Test includes two specific parts, a median income comparison and calculation of disposable income plus unsecured debts.
The first part of the Chapter 7 bankruptcy means test is the median income comparison. It compares the income of your household to the median income of a family of equal size in your state.
A bankruptcy attorney in your area should know how your income compares to the median. A lawyer can also assist you with the rest of the filing process.
If you discover that you do not fall below the median income level, don't worry. There are more criteria involved in determining if you can file for Chapter 7 bankruptcy.
Step two is actually composed of a few smaller steps. To begin, you must determine your "disposable income." This figure comes from subtracting those expenses considered "allowable" by the IRS from your total income.
If this calculation yields a number less than $6,000 for the next five years ($100 per month), you qualify to file under Chapter 7. If you find that your disposable income over the next five years will exceed $10,000, you will only be eligible to file under Chapter 7 if you can prove you have special circumstances.
If your disposable income is between $6,000 and $10,000, another calculation comes into play where you must compare your disposable income over the next five years to a percentage of your unsecured debts to determine whether or not you are in a position to make any significant repayment to your creditors.
If your projected disposable income for the next five years is more than 25% of your non-priority, unsecured debts, you're grouped with those who have $10,000 in disposable income, and can only qualify for Chapter 7 bankruptcy under special circumstances. If your disposable income comes to less than 25% of your non-priority, unsecured debts, you can file for Chapter 7 bankruptcy.
The calculations involved in the Chapter 7 means test can be confusing. A local bankruptcy attorney can help you throughout the means test process. The terms and formulas involved in the means test can get tricky not only because of the terminology involved ("unsecured," "non-priority," "disposable," etc.) but because of the rules outlined by the IRS.
If Chapter 7 sounds like a workable solution for you, get in touch with a bankruptcy lawyer right away. Give us a call at 877-421-3761 or fill out our free bankruptcy case evaluation form, and we'll put you in contact with a bankruptcy attorney near you.