Bankruptcy Means Test in Los AngelesBankruptcy Means Test in Los Angeles

Within the process of filing for bankruptcy, the “Means Test” helps determine whether your income is sufficiently low enough for you to file for Chapter 7 bankruptcy. The test separates those eligible for filing Chapter 7 bankruptcy and those for whom Chapter 13 bankruptcy will be a more appropriate option. Chapter 13 bankruptcy is more appropriate for filers with higher incomes who will be required to repay a portion of their debts instead of eliminating all debts as with Chapter 7 bankruptcy.

The Means Test was created to mitigate the overuse of Chapter 7 filing, reserving this option for those who are truly unable to repay their debts. Taking the Chapter 7 means test does not require that a person be entirely destitute to file for Chapter 7 bankruptcy. An attorney will assist you in determining the ratio between your income and higher expenses from a mortgage, car loans, medical expenses and excessive taxes. If you fall within a higher income bracket yet have excessive expenses, you may still qualify for filing Chapter 7 bankruptcy.

How The Means Test Works

By deducting certain monthly expenses from your monthly income, the means test can determine your monthly disposable income. The higher an individual’s disposable income at the end of the month, the less chance they will have to be eligible for Chapter 7 bankruptcy. An attorney will also assist you in determining where your income level falls in relation to the median income for your state. If your monthly income is less than the median income for the size of your household within your state then you qualify for filing Chapter 7 bankruptcy.

In some circumstances, a more detailed approach to the means test must be taken when an individual’s household income exceeds the state median income. An attorney will assist you in determining whether or not you have sufficient disposable income at the end of each month to successfully repay some of your debts. Once you have paid your necessary “Allowed” monthly expenses, it must be determined that you can adequately pay off a certain percentage of your debts. If you cannot, then you are eligible for filing Chapter 7 bankruptcy. If your disposable income after paying all “allowed” monthly expenses exceeds the median income in your state and adds up to an amount that is deemed sufficient to repay certain debts, you become ineligible for Chapter 7 bankruptcy and an attorney will advise you toward the possibility of filing for Chapter 13.

Contact a Means Test Attorney Today

We are proud of the rock-solid reputation we have earned among our former clients and colleagues and look forward to providing you with high quality legal assistance as you deal with the possibility of Chapter 11 or 13 bankruptcy or foreclosure on your home. Please contact our offices located in Sherman Oaks and Los Angeles today to speak with one of our bilingual staff members and to start the process of financial recovery. As a Southern California debt relief agency, we are standing by to assist you. Call us at (213) 699-3055 today for a free consultation.