Generally, filing for bankruptcy isn’t anissue that you can take lightly. The Benenati Law Firm, reputable bankruptcy experts, asserts that bankruptcy can be a delicate period in which you will go through financial and emotional stress. You can file for Chapter 7 bankruptcy or Chapter 13 bankruptcy.
That said, most people don’t know how they can find out the right type of bankruptcy they might be eligible for. However, a means test can help you understand the bankruptcy type that might work well for you.
Generally, a bankruptcy means test is created to help decide whether you are eligible to file for Chapter 7 bankruptcy. Most people prefer this type of bankruptcy as it wipes off the larger part of their debts and the process doesn’t take long. Anyone can file for this type of bankruptcy, but the law prohibits those with a high level of disposable income from doing so. Such people should seek other options such as negotiating with their creditors or Chapter 13 bankruptcy.
Means test has two parts, and it focuses on the calculation of your income and expenditure over the last half a year. It is an essential part for anyone filing for bankruptcy. Therefore, you need to consult with an experienced bankruptcy lawyer to guide you through the process of taking the means test and ensure that you benefit from the best possible outcome.
The primary objective of the means test is to determine whether or not your household income over the last six months is higher or lower than your state’s median income. If your income is lower, that means you have passed the means test, and you can file for Chapter 7 bankruptcy. Though this can happen, most people don’t earn less, and thus, it is advisable that you gather all the relevant documents about your income in the last half a year. If your income is still higher than your state’s median, you can proceed to the next step of the test.
In the second step of the means test, it is crucial that you are accurate. You must gather all details about your expenditure over the last six months. Once you have documented everything, you have to deduct allowable expenses from your monthly income. These are important expenses a good living such as food, paying medical bills, and rent. After making all these deductions, you will remain with disposable income.
This is the amount of income you can use to pay off your debts. For you to pass the test and be eligible to file for Chapter 7 bankruptcy, your disposable income should be low. If it is deemed too high, you will not be eligible for Chapter 7 bankruptcy.
The bottom line is, means test as an integral part in determining the right bankruptcy option. Therefore, you should seek professional guidance from a reliable bankruptcy attorney. These professionals know the ins and outs of means test and the entire bankruptcy process.