The Bankruptcy Means Test Explained
The means test is a tool used in bankruptcy cases to determine your financial eligibility to qualify for Chapter 7 bankruptcy. There are two parts to the means test. The first part is determining if your monthly income is below your state’s median income. You start this process by gathering six months’ worth of income statements, as the test is based on your most recent 6 months’ worth of income. If you are below your state’s median income, you passed the tests and can file for bankruptcy.
If you make more than the median income, then you move on to the second part of the means test. This step involves gathering documentation of your expenses. Only “allowable expenses” matter in this part. Things like rent, food, clothing, medical bills, and utilities are part of these expenses. Anything outside these necessities is disposable income that can be used towards paying back debt. You have to be thorough so as not to exclude qualifying expenses and misreporting amounts. This can result in your case being dismissed.
Contact Our Bankruptcy Lawyer Today!
Elmly Law P.C. is a bankruptcy attorney serving the Midland, MI community. The means test is a tool used to determine eligibility for Chapter 7 bankruptcy. There are two steps to the test. If you do not pass the first part, you can still be eligible by passing the second part. Determining eligible income and expenses to help build a solid case for bankruptcy is not easy without extensive knowledge of the process. Our lawyers will help you through the entire process and make sure that all “allowable expenses” are accounted for. Contact us today to learn more about the Chapter 7 bankruptcy process!