Los Angeles Means Test Lawyers
Bankruptcy is a powerful tool for eliminating debts, but Congress has long feared that people will abuse the system. In particular, they are afraid that higher-income individuals and couples were filing for Chapter 7 to eliminate debts which they really could pay back. To prevent this from happening, Congress created the “means test,” which applies to Chapter 7 bankruptcy (and has a smaller role to pay in a Chapter 13). Please contact Wadhwani & Shanfeld if you have questions about this test or anything related to bankruptcy. Our Los Angeles means test lawyer will happily discuss your debt management options in a confidential meeting.
Do You Qualify Under the Means Test?
The means test determines whether your disposable income is low enough to qualify for a Chapter 7 bankruptcy. One metric is to compare your income to the state’s median for a family of comparable size. If you’re under the median, then you automatically qualify and can file for Chapter 7 if that’s the best option for you.
If your income is over the median, then we need to take a closer look at how much you bring in and what you spend it on. We can use your documented expenses for things like housing, transportation, and food and deduct them from your income to see if your disposable income is low enough to qualify.
The state’s medians are updated regularly—usually once a month. And they are state specific, so if you didn’t qualify under Oklahoma’s median, you might qualify under California’s. You will also use the most recent six months of income. If you’ve recently lost your job, then you can wait and ultimately qualify under the median.
The means test also plays a role in Chapter 13 bankruptcies. If your income is below the median, then you will only need to stick to a payment plan for three years before you complete your bankruptcy. If your income is above the median, then you will probably have a five-year repayment plan.
Strategies for Qualifying for the Means Test
The means test might seem like a barrier, especially for those with high incomes. But there are ways to qualify. For one, if you are considering divorce, then you might file after you get your divorce petition. Once newly single, you will only need to include your individual income, which might put you under the median.
Another strategy is to wait, especially if your hours have been cut to part time or you have lost your job. After a few months, your income should be low enough that you comfortably come in under the median for a family of your size.
Also work closely with an attorney to calculate your disposable income using expenses. Our Board-Certified specialists have years of experience making sure Chapter 7 is available to all who qualify.
Contact Us Today
Instead of trying to guess whether you pass the means test, call Wadhwani & Shanfeld. Our Los Angeles the means test lawyer will go over your finances and help with calculations.