A chapter 7 bankruptcy is one of the greatest tools that consumers can use to get a “second start” at a healthy financial life. Because a chapter 7 filing discharges your debts, you no longer have to worry about creditors and can instead focus on responsible money management. However, to have your debts discharged through chapter 7, you must pass through the “means test” to determine whether or not you qualify. Even with the help of a Tampa bankruptcy lawyer, the means test is a mandatory requirement for each chapter 7 beneficiary. So what exactly should you expect?
Understanding the Means Test
The means test for a chapter 7 bankruptcy is used to distinguish those debtors who truly can’t repay their debts from those who can. The means test is accomplished by deducting your monthly expenses from your monthly income. This will be averaged over a six month period to determine what is called your “disposable income.” This disposable income is the money you have left after basic spending needs, such as your mortgage or your food. The higher your disposable income, the lower the chances of your Chapter 7 filing being approved.
There are two major considerations when it comes to your income:
1) Is it more than the median? Your income and disposable income will be compared against families in a similar situation in your state. If you are below the median level, the chances of being approved are higher. However, the opposite is also true, in that being above the median income level will make it harder to pass the means test. Even with the help of a bankruptcy lawyer, passing the means test relies largely on your income. Remember that even if chapter 7 isn’t an option for you, your bankruptcy lawyer can help you file for chapter 13 instead.
2) Do you have enough disposable income to repay some debts? If this is the case, then be sure to discuss reorganizing your debts with the help of a bankruptcy lawyer. Your bankruptcy lawyer will help you ensure that your new plan is feasible – and you might even have some debts discharged or reduced!