What is the Means test? The two most common forms of personal bankruptcy are Chapter 7 and Chapter 13. In order to determine whether or not you qualify for a chapter 7 bankruptcy, you must first pass the means test. The means test is a formula created to ensure that those filers who have sufficient income to repay a portion of their debt do so, while Chapter 7 is reserved for those who are have no means to pay their debts.
The first step in the means test is comparing your income to California’s median income. Your income should include all monies received, including: • Wages, salaries, and tips • Child or spousal support • Interest and dividends • Rental or other property income • Unemployment compensation • Workers’ compensation • Disability insurance • Retirement income You may not be required to include Social Security Disability or retirement benefits or TANF payments in your income report. Talk to our attorney about all your income in order to ensure your forms are complete and accurate. Having an income above the median income for California does not necessarily mean you did not pass the means test. Our bankruptcy attorney in California can help you subtract allowable expenses from your income in order to find your actual disposable income. Once your disposable income has been estimated for the next five years, a series of calculations will determine whether or not you pass the means test. For example, if your disposable income exceeds 25 percent of your unsecured debts, you most likely will be required to file for Chapter 13 bankruptcy. Not all debtors are required to pass the means test before filing their bankruptcy forms. Disabled veterans who have incurred debts while engaged in defense activities or on active duty or those whose debts are due to operating a business will not need to pass the means test. Filing for Chapter 7 bankruptcy can help you save a certain portion of your personal property through bankruptcy exemptions. Discussing your options with our Los Angeles bankruptcy lawyer can help ensure you make the best decision for your situation. Source: Los Angeles Bankruptcy Lawyer Back to Blog |
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Samuel- Woodland Hills, CA
My wages were being garnished, and I was getting sued by creditors. I could not pay my debts to credit card companies. Hamid Soleimanian filed a chapter 7 bankruptcy for me and stopped my wages from b...