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Los Angeles Bankruptcy Lawyers / Sherman Oaks Means Test Lawyer

Sherman Oaks Means Test Lawyers

The means test is used in Chapter 7 bankruptcy to determine the debtor’s eligibility. If they fail the means test, they will not be able to file for Chapter 7, but may be eligible for Chapter 13 bankruptcy. If you are struggling to pay off your debt, bankruptcy may be your best option for getting a fresh start. To begin, you need to determine what type of bankruptcy you qualify for, as well as what secured and unsecured debt you hope to extinguish or minimize through a repayment plan. The Sherman Oaks means test bankruptcy lawyers at Wadhwani & Shanfeld can take it from here.

How the Means Test Works: First Part

The means test is simply used to determine whether or not a debtor can actually afford to pay the debt they owe to a lender. The first part of the test answers this question: Is the debtor’s current monthly income (over the past six months) more than census bureau median income in California? If their income is lower than the state median, they automatically qualify for Chapter 7. If their income is higher than the state median, they need to move onto the second part of the means test to see if they qualify.

Second Part of the Means Test

Step two requires gathering receipts and documenting your expenses over the past six months. Items such as groceries and rent are put into the allowable expenses, while everything leftover is considered disposable income. So, if your monthly income is $5,000 and you spend only $3,000 of that on food, rent or mortgage, clothing, utility bills, and other necessities, the rest may be considered disposable income. It is important to be as accurate and honest when documenting your expenses, but the court will look for errors and may automatically deny your case if any are detected. If your disposable income is low enough, you may end up qualifying for Chapter 7. If your disposable income is too high, you will only be eligible for Chapter 13.

Chapter 7 Vs. Chapter 13 Bankruptcy

The simple explanation of Chapter 7 versus Chapter 13 is as such: in Chapter 7 bankruptcy the debtor has all of their unsecured debt discharged, and they are usually allowed to keep all of their possessions (the living room couch is generally not carted away by a repossession company). In Chapter 13, the debtor has to adhere to a three to five year repayment plan during which they must continue making payments to the lender. After this period is over, any remaining debt is discharged.

Call a Sherman Oaks Means Test Attorney Today

The means test can be used to determine your eligibility for Chapter 7 bankruptcy, which is often the preferred form of bankruptcy for people with unsecured debt. To see if you are eligible, you need to work with an experienced Sherman Oaks means test attorney. Do not hesitate to call Wadhwani & Shanfeld today at 899-996-9932 to schedule a free consultation.

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