Chapter 7 bankruptcy allows you to discharge certain unsecured debts, such
as credit card debt and medical bills. When you file for Chapter 7, you
are basically saying that you don’t have enough income to pay off
your debts. Known as liquidation bankruptcy, Chapter 7 will allow you
to liquidate certain assets to pay off some debts, and many other debts
will be discharged. Because this could easily be taken advantage of by
those simply wanting their debts to go away, a means test has been established
to determine eligibility.
How Does the Means Test Work?
The means test is a calculation to determine if you have disposable income
at the end of each month. If you do have disposable income, you may need
to file a Chapter 13 bankruptcy and create a repayment plan. However,
if you don’t have enough income on a monthly basis, you will be
eligible to file for Chapter 7.
The U.S. Census Bureau and Internal Revenue Service puts forth a median
household income standard, which will be compared with your aggregate
monthly income for the past 5 years (minus certain expenses). Your family’s
household size will also be accounted for in this equation. Once your
aggregate household monthly income has been calculated, it will be compared
with the median standard to determine your eligibility for filing Chapter 7.
The means test takes several sources of income into consideration, including:
- Business income
- Retirement plans
- Interest and dividends
- Rental income
- Unemployment income
If your income is below the median level, you will be able to file a Chapter
7 bankruptcy. However, if it is above the median level, you will need
to file a Chapter 13 bankruptcy. The calculations of the means test can
be complicated, and one mistake in your paperwork could prohibit you from
filing for Chapter 7. That is why it is important to have the assistance
of an experience
Chapter 7 bankruptcy attorney to guide you through the process.
Call Our Detroit Chapter 7 Bankruptcy Lawyer Today at (888) 822-6730
At the Law Offices of Marshall D. Schultz, we offer knowledgeable legal
assistance to clients facing bankruptcy. We know this is a stressful time
for you and your family. That is why our attorney will answer your questions,
analyze your situation, and discuss your options for seeking a fresh start in life.
today to receive an immediate, free consultation.