The bankruptcy “means test” is designed to determine if a person is eligible to file a chapter 7 bankruptcy or if they are more suited for chapter 13. Eligibility is measured by the amount of the person’s income in comparison to his expenses. Subtracting the timely payments for things like his home mortgage and personal insurance coverage from his monthly earnings will determine what is perceived to be his “disposable income,” or the money that is left over. If his disposable income is sufficient to make it possible to pay off at least a part of what he owes to his creditors, he will not be able to claim chapter 7 bankruptcy.
If it can be concluded that the filer’s income is less than the median for his circumstances he will automatically be eligible for chapter 7 bankruptcy. The median income is that which is in the middle, meaning that half of the households in a specific area earn a higher income and the other half a lower income than the decided median amount. The median income will vary from state to state. Factors that are considered in estimating an income will include earnings from rental properties any work bonuses or cash benefits associated with retirement as well as unemployment compensation.
There are some exceptions to the rule. Disabled armed service veterans whose debt was incurred while they were on active duty are exempt from taking the means test and will always be approved for a chapter 7 bankruptcy. Businessmen and women are also exempt if their debt is a direct result of their enterprise.
A lawyer who is experienced in the bankruptcy process that applies in the state of the debtor’s residency can lend guidance from the earliest stages throughout to the conclusion of his bankruptcy claim. A bankruptcy attorney will be able to determine the best course of action after consulting with his client so that there will be no question of eligibility.
Parker Lawyers is well versed in the bankruptcy laws specific to the state of Colorado. Call the offices @ 303-841-9525 to arrange a consultation with an experienced attorney.