Lancaster Means Test Lawyers
A Chapter 7 bankruptcy is a great way to quickly eliminate certain debts. It takes about 3-4 months, and consumers can eliminate most credit card debts and personal loans, along with medical debt and other unsecured debts. Unless you have a lot of property or other assets, a Chapter 7 bankruptcy is typically the way to obtain a fresh start financially in a brief amount of time.
Concerns over people exploiting Chapter 7 motivated Congress to create a means test. Call our Lancaster means test lawyer today to see if you qualify under the test. We look more closely at the means test below.
Do You Pass the Means Test?
There are a couple ways to pass this test.
First, you need to compare your household income for the past six months to the median in your state for a household of your size. You can find the most recent medians listed at the U.S. Trustee’s website. The income listed is the maximum you can have to pass the means test. These income limits get updated regularly—sometimes once a month—so make sure you are using the correct numbers.
In June 2023, for example, the following medians apply for California:
- 1 household earner: $75,235
- 2 person household: $93,175
- 3 person household: $104,785
- 4 person household: $122,707
You should take your income for the most recent six months and multiply by 2 to get a full year’s income. If you are under the median, then you have automatically passed the means test. Congratulations! You can apply for a Chapter 7 bankruptcy.
What happens if you are over the median? You might still qualify, but we need to look more closely at your expenses. Working with a lawyer, you should gather evidence of your monthly expenses for things like:
- Rent or mortgage
- Medical care
- Groceries
- Clothing
- Other allowable expenses
Once all your allowable expenses are considered, your lawyer will determine your disposable income. If that income is low enough, then you’ll also pass the means test. This second way is very detailed, and you should be thorough and accurate about your expenses.
What happens if you fail the means test? You do have options. You might file for Chapter 13 instead. Or you might wait and file for Chapter 7 later. Remember, the means test looks at your income for the past 6 months, and your income might go down in the months ahead, allowing you to qualify.
If you choose to file for Chapter 13, then the means test also comes into play. For example, if your income is above the median, then your repayment plan will be five years instead of three.
Call Our Law Firm for Assistance
Passing the means test is only the first step in completing a Chapter 7 bankruptcy. There are many considerations before you file, so please reach out to Wadhwani & Shanfeld today to discuss whether this is the correct option for you. Some people realize that a Chapter 13 is more appropriate. Contact our Lancaster means test lawyer with any questions.
