7 Bankruptcy in Long Island
Passing the means test is the first step to filing for Chapter 7 bankruptcy in Long Island. It can be complicated and depends on your individual situation.
However, there are strategies that can be used to maximize the chances of passing the means test. These require a thorough understanding of the criteria and the state and federal laws that govern the calculations. Contact Bankruptcy means test lawyer Today
What is the Means Test?
The purpose of the bankruptcy means test is to ensure that people with enough disposable income aren’t able to file for Chapter 7. The complex formula compares the debtor’s income and expenses to the median income in their state for households of similar size.
The calculation uses the debtor’s average monthly income over the past six months. However, there are many factors that can affect this figure. For instance, the debtor may receive a holiday bonus during this period.
In addition, the bankruptcy code allows debtors to deduct certain expenses from their income. This includes alimony, child support, and health care costs.
Then, the bankruptcy judge will use the results of this analysis to determine whether or not a person is eligible for Chapter 7 relief. The person would qualify if they have enough disposable income to pay at least 25% of their unsecured nonpriority debts over a five-year period. It is important to note that passing the means test doesn’t necessarily mean that a person should file for Chapter 7. For example, disabled veterans who incur a lot of consumer debt due to their military service may not pass the means test.
What are the Steps to Passing the Means Test?
The means test compares a debtor’s income over the past six months (current monthly income) to the median income for households of similar size in their state. Certain allowable expenses are deducted from the current monthly income, which is then divided by sixty to arrive at a number known as the debtor’s “disposable income.” This is the amount that would be paid toward unsecured debts in a Chapter 7 bankruptcy.
If the debtor’s current monthly income is less than the median income for their state, they pass the first step of the Means Test and can file a Chapter 7. However, many individuals are not quite so lucky, and they must complete steps two through five to determine whether or not they are eligible to file for a Chapter 7. It is important to consult with a skilled attorney who understands the criteria that goes into calculating disposable income and has a comprehensive understanding of state and federal bankruptcy law.
Can I Bypass the Means Test?
Generally, the bankruptcy means test only applies to individuals who have consumer debt. Individuals with business debt, tax debt, or debts awarded in a lawsuit will not have to take the means test because these types of debt are usually non-consumer.
The bankruptcy means test compares the debtor’s current monthly income (CMI) to the state median for households of a similar size. The CMI is then deducted for allowable expenses, and the result is the debtor’s monthly disposable income. If this amount is low enough, the debtor will qualify for Chapter 7 bankruptcy.
If the debtor is married, the income of both spouses will be included in the calculation. This can cause difficulties because the debtor’s expenses may be higher than those of their spouse. The debtor can try to overcome this obstacle by claiming special circumstances such as recent unemployment or a serious medical condition. This will help lower their average monthly income, which can make it easier to pass the Means Test.
Can I Retake the Means Test?
When you file for Chapter 7 bankruptcy, you must pass the Means Test in order to wipe out your debts. The means test uses your current monthly income (CMI) to calculate whether you can file for Chapter 7. Your CMI is based on all qualifying income sources for the previous six months—also known as a look-back period.
Step one of the means test compares your income to the median income for households of your size in your state. If your CMI is less than the median, you are below the limit and can file for Chapter 7.
The second part of the means test looks at your deductions—including food, clothing, shelter, transportation and health care. There is a lot of room for interpretation, so calculating your expenses is best left to an experienced bankruptcy attorney. There are also times when waiting to file would allow you to take advantage of deductions or make changes to your income to improve your chances of passing the means test.
Bankruptcy Means Test Lawyer – How to Pass the Means Test in Chapter