Bankruptcy and the Means Test
While filing for bankruptcy is not overly difficult, there
are a number of important things to keep in mind. Before you can file you must run what is
known as the “means test”. The means
test determines which chapter of bankruptcy you will file under.
The means test looks at your income. If you exceed a statutory threshold you are
forced to file a Chapter 13 bankruptcy.
However, if after running the initial income test your income exceed the
“means”, you aren’t necessarily out of luck.
The means test also looks at certain expenses that will potentially
reduce your countable income.
The means test is several pages long, but it, in and of
itself, should not be intimidating. After
you go through the first several questions, you will know if your income is too
great to file for Chapter 7 bankruptcy.
If your income is not above the statutory level you need go no further.
Bankruptcy and Military Service
There are some interesting exceptions in the means test as
well. For example, if you are an active
member of the military and you incurred the majority of your debt while on
active duty, you qualify for a Chapter 7 automatically. There are also exceptions for members of the Guard.
Chapter 13
If you don’t qualify for a Chapter 7 Bankruptcy you can
explore a Chapter 13. Some people are
concerned about going that route because they want all their debts
discharged. However, a Chapter 13 might
actually work better in some cases. In
it you reaffirm debts and create a repayment plan. It allows you to save your house and other
items if you reaffirm. And while not all
of your debts are discharged if they are unsecured they will be.
Another consideration about filing out the means test is
family size. The more people in your
family, the greater the income you can have and stay within the means. Obviously, you would count your spouse and
your children. This can get tricky if you
are in the process of divorce, or you have already gone through a divorce. Can you count the kids if you only have shared
custody? What if you are engaged to be
married? Do you consider your fiancé part
of your household? These are all
questions your Boise Bankruptcy Attorney can discuss with you to help you
decide which bankruptcy route is best for you.
If you want to speak to an affordable and experienced Boise
Bankruptcy Attorney, please give us a call at 208-472-2383. You will be glad you did.
I should be passing this information to some people I know who are afraid of filing for ch-7-bankruptcy. This could help them.
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