Means Test for Chapter Seven Bankruptcy
The new bankruptcy laws passed in 2005 created some new forms that must now be completed in a bankruptcy petition, including the Means Test in a Chapter 7 bankruptcy. The courts created the means test in order to see if you have enough available income to pay your debts, rather than wiping them out. Congress also added several other requirements including credit counseling and personal financial management courses.
The bankruptcy means test includes 57 questions about your income and expenses which are then compared to national and regional norms to determine if you make and spend more than most people in your area, as well as what your disposable income is or should be. If your debt is mostly non consumer debt or you happen to be a disabled veteran you will not have to complete most of the means test as the presumption of abuse does not arise automatically. The means test presumption of abuse signifies that you may have enough income to pay your debts. If the presumption does arise at the end of the means test you may be pushed to file a Chapter 13 bankruptcy.
The second section will determine your income. The third section will determine your average yearly income and compare it to the median family income based on the state you live in, and the size of your family. If you have a higher income than the other families, you must continue filling out the means test, if less, the presumption of abuse does not arise and you are done.
The next step is adding in your expenses which are determined by where you live and the number of people in your family, such as groceries, mortgage or rent, utilities and your car.
The final part is determining how much money you have left over each month. If you have less than $6575 a year, the presumption does not arise, if you have more than $10,950, the presumption arises, and if you have somewhere in-between $6576 and $10,949 you must proceed with the means test form which compares the amount of unsecured, non-priority debt you have with your disposable income.
The bankruptcy means test is confusing, so conferring with a bankruptcy attorney is always a good choice before you file bankruptcy.
