The Chapter 7 Means Test
The Means Test was created in the Bankruptcy Reform Act of 2005. It may be the most important test you are facing right now. If you fail it you may not be eligible for a Chapter 7 discharge of debts. If you pass it, then you can pursue a Chapter 7 discharge with the help of your Montgomery County Bankruptcy Attorney.
What is the Means Test?
The Means Test is an income test to determine if your are eligible to file a Chapter 7 bankruptcy. Your bankruptcy attorney must complete several steps to complete your Means Test. First, we look back and average your income over the six month period prior to filing the case. Next, your bankruptcy attorney compares your income to the median household income in your county for a household of a similar size. If your income is below the median income, your are presumptively eligible to file a Chapter 7.
If Your Income is Too High
If your income is above the median, it requires additional analysis to determine if you are eligible to file Chapter 7. You may still be eligible, but your bankruptcy attorney will need to build a case for you based on your expenses. The IRS has developed certain allowances for housing, transportation, medical expenses etc. which may be deducted from your income. There are also additional IRS allowances based on taxes, insurance, child care, telecommunications, charitable contribution etc. In addition, your Conroe Bankruptcy Attorney may also subtract payments for secured loans such as mortgages, vehicles and other secured property. Priority debts such as child support and alimony may also be deducted from your income.
If You Fail the Means Test
You can fail the means test if after deducting all of the allowable expenses from your average current income you have approximately $100.00 or more available to pay creditors. Failing the means test creates a presumption that the case should not be eligible for Chapter 7. The U.S. Trustee will generally bring a motion to dismiss the case. The motion can be defended against by showing special circumstances. Special circumstances can be a reduction in income or job loss. Other special circumstances could be a long commute, high medical bills, student loan payments etc.
Get Help
Your Conroe Bankruptcy Attorney is here to help you get through the bankruptcy process and protect your rights to the fullest extent. Don’t let a mistake on the Means Test or another issue harm your pursuit of debt relief. Get help today.
LoneStarBankruptcy.com provides the latest news and information on Chapter 7 and Chapter 13 bankruptcy in the Southern District of Texas. The Federal Bankruptcy Court for the Southern District of Texas covers many communities including: Houston, Conroe, The Woodlands, Montgomery County, and Harris County. If you need legal assistance with a personal bankruptcy matter speak with a local bankruptcy attorney today.
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