In order to be eligible to file Chapter 7 bankruptcy, you must pass the means test. In its simplest form, the means-test is a way to separate out those who “need” bankruptcy from those who don’t. It was developed to keep people from abusing Chapter 7 Bankruptcy protection. You only have to pass the means test for Chapter 7 bankruptcy. Borrowers seeking relief under Chapter 13 will not be required to pass the means test. Additionally, the means test may not be applied in your case if you are a disabled veteran or if your debt is primarily business-related debts as opposed to consumer debts.
Trying to figure out how to pass the means test can be very complicated. As such, it is important to consult with a Tampa bankruptcy lawyer before deciding that the Means Test will or will not disqualify you from filing a successful bankruptcy case. A bankruptcy attorney may be willing to offer a free consultation to help determine your eligibility for Chapter 7.
The First Step to Pass the Means Test
Part-One of the trying to pass the means test involves looking at the average income of the debtor. Under some circumstances, the spouses income may be considered as well. The Court will look at the average income, which it will calculate by looking at the average monthly over the last six-months, then multiplying that figure by twelve (to account for one year of income) to determine if you pass the means test. The Court will then look at that number compared to the state median income. If your income is below the median income, you would finish and there would be no presumption of abuse. See bankruptcy law 707(b)2.
How to Pass the Means Test If Your Income is Above the State Median Income
If your income is above the national median, you would need to continue to Part-Two of the means test. At this time, the Court will evaluate your income after considering some allowable deductions. This part of the test is very complicated: some of the allowable deductions are established through the IRS code, others still through the census bureau. This is where it becomes even more important to consult not just with an attorney, but an experienced Chapter 7 bankruptcy attorney. An experienced bankruptcy attorney can use the IRS Code, Bankruptcy Law, Census data, and other information to help you pass the means test.
Presumption of Abuse
Part-Two involves the Court trying to uncover your true disposable income. See bankruptcy case Ransom v. FIA Card Services. If the income is over the state-median income after deductions, there will be a presumption of abuse. A presumption is like an assumption, but one with legal ramifications and that presumption must be overcome with evidence; without evidence a presumption will stand as if fact. Should there be a presumption of abuse in your case, you will be required to give details about an exigent or special circumstances that justify your need for Chapter 7 and or specifics about your financial situation (income, debts, or assets.) Additionally, you may be required to attest to the accuracy of this information. See Official Form 122A-2.
Some things that might help you overcome this presumption would be recent loss of job, a one-time bonus effecting income which is not likely to continue, a recent influx in self-employment income not likely to repeat, etc. It is important to remember that even if you find yourself in a situation where the presumption of abuse applies, you can still pass the means test. Further, even if you cannot overcome the presumption, Chapter 13 may be a viable option. Even further, the timing of your filing may affect your Means Test results. Therefore, an experienced Tampa bankruptcy attorney can help you decide when is a good time to file in your individual circumstance, as well as which bankruptcy filing (Chapter 7 or 13) will be most advantageous in your circumstances.
Tampa Bankruptcy Law Firm
At Florida Law Advisers, P.A. we understand that filing for bankruptcy can be a very confusing and intimidating process. That is why we work so hard to make the process as easy as possible for our clients. Regardless, if you need help with Chapter 7 or Chapter 13, we will assist with compassion. To schedule a free consultation with a bankruptcy lawyer in Tampa call us today at 800 990 7763.