Determining Chapter 7 Bankruptcy Eligibility
Since the October 2005 bankruptcy law changes were passed, individuals wishing to file for Chapter 7 bankruptcy must pass the means test. This test is designed to determine if a person has enough disposable income to repay any of his or her debts. It is a complex formula that takes your income, expenses and total amount of debt into consideration.
At Simon Resnik Hayes LLP, our bankruptcy attorneys have detailed understanding of the means test. We have helped thousands of people in Los Angeles and other Southern California communities obtain debt relief through Chapter 7 bankruptcy, allowing them to rebuild their financial future on more solid footing. Call us at 310-598-7365 or 888-368-4099 to arrange a free consultation and learn if you pass the means test.
What Is the California Means Test?
The means test is an attempt to limit Chapter 7 bankruptcy to those who are truly unable to pay their unsecured debt. It was created to encourage those who are able to repay even a small portion of their debt to file Chapter 13 bankruptcy, the debt reorganization plan.
The first part of the means test compares your monthly gross income for the past six months to the median income in California. If your income is less than the average, you probably qualify for Chapter 7 bankruptcy. If it exceeds the median, deductions for housing, child care, medical expenses and other costs are applied to determine a monthly net income figure.
Not being keenly aware of the means test could cost you hundreds of dollars each month. An experienced bankruptcy lawyer can help you navigate this test and save you money.
What is the Alternative?
If you make too much money to file Chapter 7 bankruptcy, all is not lost. You may file Chapter 13 instead. With Chapter 13 bankruptcy, your unsecured debt is rolled into one monthly payment, determined by your ability to pay, which you make over a period of three to five years. After the designated time is over, all remaining unsecured debt is discharged. One benefit of this type of bankruptcy is that you can remove junior liens, including second and third mortgages.
Experienced Bankruptcy Lawyers Helping You Get a Fresh Start
Calculating the California means test is complex. One simple mistake could result in the dismissal of your bankruptcy petition. Protect yourself by speaking with our bankruptcy lawyers. Contact us today to schedule a free consultation and discuss your eligibility for Chapter 7 bankruptcy.
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