Chapter 7 bankruptcy allows many people in financial straits to erase their debts and get a fresh start. However, not everyone can take advantage of this option. U.S. bankruptcy law requires most individuals to satisfy a means test to determine their eligibility. Gates Law Group, A Professional Corporation understands this test and can give you reliable advice on how to complete it.
The Chapter 7 means test determines whether an individual debtor are capable of working with creditors to pay off at least some of his or her debts. If so, the debtor is not eligible for Chapter 7 relief. If you come to us for bankruptcy advice and give us the necessary information on your income and expenses, we can do the math for you and advise you whether you pass.
The first step of the test is to determine your average monthly income during the last six calendar months before you filed. You must include in this calculation all of your income except Social Security payments and certain extraordinary government benefits. If you have less than the median income for a household of your size in California, you pass the test. If you have more than the median income, you may subtract certain expenses, such as housing, utilities, child care, taxes and insurance, to determine if you have enough income left over after meeting those expenses to pay off a certain amount of your unsecured debts within five years. If that leaves you with a figure below the median income, you still pass the test.
If, after completing all calculations, you still have more than the median income for a household of your size in California, the law presumes that your prospective bankruptcy is abusive. However, you may overcome that presumption by showing special circumstances that justify additional expenses or adjustments of current monthly income for which you have no reasonable alternative, such as a serious medical condition or a call to active duty in the Armed Services.
Even if you pass the means test or show special circumstances in spite of failing it, the court must consider whether the totality of the circumstances of your financial situation demonstrates abuse before granting you relief. If you come to us for bankruptcy advice, and provide us with the necessary information, we will determine if you have a chance of qualifying for Chapter 7.
Not all Chapter 7 filers need to take the means test. You are exempt if any of the following is true:
Whatever your situation, we will help you comply with the means test requirement with the goal of establishing Chapter 7 eligibility.
If you want to consider Chapter 7 bankruptcy, Gates Law Group, A Professional Corporation can give you dependable advice on the means test. Please call 559-432-9944 or contact us online to schedule a free initial consultation. We serve clients from our main office in Fresno and locations in Paso Robles and Visalia.