Chapter 7 Bankruptcy and Means Test

Columbus GA Chapter 7 Lawyer

Chapter 7 bankruptcy is the liquidation bankruptcy. When you file for bankruptcy under chapter 7, your assets and other properties are liquidated in order to recover money to pay off your creditors. Bankruptcy is regulated by federal laws but the list of exempted property is under the regulation of state laws. Thus depending on state, debtor can draw up a list of property that he can retain even after being declared bankrupt. Chapter 7 bankruptcy discharges all debts of debtor.

There came a time while chapter 7 bankruptcy began to be misused by debtors to forego paying debts. The law was soon amended making it difficult to qualify for chapter 7. The new reforms introduced compulsory credit counseling for all people filing for bankruptcy and a means test which determined type of bankruptcy that debtor qualified for.

Means Test

You need to determine if you are above the median income before you file for bankruptcy under either chapter 7 or chapter 13. This median income test is primarily based on average income of specific state and is calculated annually by US Census Bureau.

The income taken into consideration here is not the actual income got from your salary. It is a total of all possible income you received for a period of six months before filing for bankruptcy. This total income is divided by six and multiplied by twelve. Instead it is common sense to think that you could just double your total income of six months to get your annual income. But the problem you could face is that there could be an additional bonus or you could have just lost you job and your income median would show up to be much higher than it really is. You would forfeit your eligibility to file for chapter 7 if your income shows to be higher than state median.

You need to take the Means test which allows deduction of defined expenses from total income. The expenses that can be deducted are decided by the Internal Revenue Service. There are set IRS standards that include approximate household spending for food, transportation etc. These are allowed expenses which vary according to state, city and size of household. Apart from IRS standards there are other deductions possible like if you have more secured debts, you can deduct more etc. To go through the maze of means test and deductions to be made you need expert guidance from a competent bankruptcy attorney.

The means test calculates the projected disposable income. This amount should be less than $166.66 per month for debtor to qualify for a chapter 7 bankruptcy filing. If this presumption of abuse is not overcome, debtors have to file for chapter 13 bankruptcy.

If you are searching for Columbus GA bankruptcy attorney or interested in Chapter 7 bankruptcy, then our law firm can help you.

Our Chapter 7 - Chapter 13 bankruptcy law firm is based in Columbus, GA. Our bankruptcy lawyers handle debt relief cases in and around Columbus, Fort Benning, Chattahoochee County, Harris County, Marion County, Muscogee County, Lagrange, Albany, Newnan, Peachtree City, Carrollton, Troup County.