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Fresno Attorney Advises Debtors on Whether They Pass the Bankruptcy Means Test

Determining whether you qualify for a Chapter 7 bankruptcy

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.

What is the means test and how do you pass 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.

What do you do if you fail the means 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.

Can you avoid the means test?

Not all Chapter 7 filers need to take the means test. You are exempt if any of the following is true:

  • You are a disabled veteran
  • You are a reservist or member of the National Guard and were on active duty for at least 90 days, ending less than 540 days before you filed for bankruptcy
  • If your debts are mostly caused by your business activities

Whatever your situation, we will help you comply with the means test requirement with the goal of establishing Chapter 7 eligibility.

Contact a knowledgeable California bankruptcy means test lawyer for a consultation

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 consultation. We serve clients from our main office in Fresno and locations in Paso Robles and Visalia.

COVID-19 Notice

These are unquestionably difficult times. We understand the word "crisis". Usually, people do not come to us just to say hello. They come with their problems and we have to respond quickly. We understand they need help.

The problems do not stop because of the presence of the COVID-19. Assistance from our office will continue. We have the technology available to provide our clients with continued quality legal services in order to protect their interests. We can meet our clients virtually whether by telephone or video. We can meet our clients in person but with special arrangements and implemented safeguards.

In spite of the pandemic, life does not stop. You may continue to have legal needs. Some people will have greater needs than others. We stand ready to help whatever the circumstances.

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