Understanding the bankruptcy means test

The bankruptcy means test is a critical aspect for those considering filing bankruptcy. It is a complex formula leveraged by the courts to ascertain whether you can file for Chapter 7 bankruptcy, also known as straight or liquidation bankruptcy, or whether you are eligible for Chapter 13 bankruptcy, referred to as wage earner’s plan. The Liviakis Law Firm has vast experience representing debtors in bankruptcy proceedings and can serve as your trusted bankruptcy lawyer for cases in Fresno, CA.

The means test was designed to curtail the number of consumers declaring Chapter 7 bankruptcy, which often absolves debtors of the requirement to repay creditors. Instead, it encourages individuals to opt for Chapter 13 bankruptcy, where the debtor agrees to repay all or part of the debt over a given period.

So, how does this bankruptcy means test work? How, as a resident of Fresno, CA can you navigate this procedure? Let’s delve into it: it starts with looking at your monthly income.

Comparing Your Income

The first step in performing the bankruptcy means test is to compare your average gross income for the past six months to the median income for a comparable household in California. If your income exceeds the median, you will need to continue to the next step of the means test.

Evaluating Your Disposable Income

If your income passes the threshold, the next phase of the means test will subtract any legally allowed expenses from your current monthly income to ascertain your disposable income. If your monthly disposable income after this step is high enough, the court may disqualify you from filing a Chapter 7 bankruptcy case because you can finance a Chapter 13 repayment plan.

Looking at the Bigger Picture

If it’s determined that you have too much disposable income, there’s one final step you can take. You will be given a chance to show if any special circumstances exist that allow you to file for Chapter 7 bankruptcy. These might include situations such as recent unemployment, a medical condition, or a military deployment.

How a Bankruptcy Lawyer for Fresno, CA Can Help

The bankruptcy means test is complex and can be confusing, particularly since it takes into account both income and expenses. Furthermore, the test is continually being amended with changes in median income, meaning something that was true six months ago may not apply now.

This complexity underscores the importance of seeking advice from a proficient bankruptcy lawyer for Fresno, CA‘s residents. The Liviakis Law Firm is well-versed in conducting the bankruptcy means test and can assist you throughout the bankruptcy process, ensuring that potential pitfalls and challenges are handled effectively.

Declaring bankruptcy can seem intimidating, but understanding the bankruptcy means test and teaming up with an appropriate legal representative can help demystify the process. Thus, guiding you along a path towards a better financial future.