Means Test

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Means Test

A means test is used in order to know your credibility and eligibility for Chapter 7 and/or chapter 13 bankruptcy.

A new bankruptcy law took effect on October 17, 2005, and a lot of people are getting anxious and confused about it. Having anew set of rules and a new means test requirement is difficult to struggling homeowners and families.

This article is written and formulated to explain how to prepare documents, materials, and other requirements that are necessary to understand the means test.

As a rule, the bankruptcy means test determines whether your income is low enough already to file bankruptcy.

People have to fully understand this requirement before they apply for chapter 7 or chapter 13. In order for the debtors to do this, they are required to complete the Official Bankruptcy Form 22A or 22C, which is the Statement of Current Monthly Income and Calculations.

The bankruptcy form 22A is for the chapter 7 debtors to complete while the bankruptcy form 22C is for the chapter 13 copy. These are generally for the means test calculations.

A debtor must provide and put all of their income and expenses information into the bankruptcy form. Through means test, debtors’ income and how much they have to pay for their debt are calculated based on the information and personal records written in the bankruptcy form.

Always remember that bankruptcy filers with business debts do not need to take the means test. Filers with primarily consumer debts are the ones subject to the means test. The goal of the means test is also to limit the use of chapter 7 bankruptcy.

It is un likely that you will be allowed to file chapter 7 if you have a higher disposable income. In most cases, disposable income pertains to your current monthly income. In other words, it is the income received by the debtor (other than child support payments, foster care payments, or disability payments for a dependent child made in accordance with applicable non-bankruptcy law to the extent reasonably necessary to be expended for such child), less amounts reasonably necessary to be expended.

In simple terms, disposable income is the money you have after you have met your reasonble living expenses (paid your bills).

Generally, the means test is used to determine the sources of your income if they fall within a certain level. Also, there is what bankruptcy law referes to as income disregards. It pertains to the income not taken into account. This sometimes happens when an income from a certain and specific source is not taken into account.

The means test for filing a bankruptcy could be a complex calculation. We can make it easier for you to figure out how the means test will be applied in your situation.

If you have any questions regarding bankruptcy and/or the means test and how to meet its requirements, please contact us at (509) 927-3840 for a free consultation.