Utilizing the Bankruptcy Mean Test
Provided by HG.org
Preparing for bankruptcy is often difficult, but the person affected must ensure he or she qualifies based on certain criteria such as the bankruptcy mean test. This is used to determine if the person has low enough income to file Chapter 7 when bankruptcy is the only way out of financial ruin and needed to resolve these matters.
The bankruptcy mean test is used for low income earners in determination of Chapter 7, but not everyone qualifies. When someone earns too much, this test weeds out these persons to ensure only those that should be utilizing Chapter 7 are doing so when bankruptcy is the only way out of financial distress. When the income earned is too much, the individual may file Chapter 13 so that some debts are paid as opposed to Chapter 7 were most of these are wiped away from the personís record. It is important the correct applicants are able to use the right process for these issues.
When bankruptcy is certain, it is important to check the mean test for sufficiently low income for a Chapter 7 of wiping out most or all of the debt someone has incurred in his or her life. When the requirements are met through this test, the individual is afforded the opportunity to wipe away these debts from his or her record. However, before the process has been completed, the applicant must consider the consequences. It is often advisable to contact a lawyer to file these documents and ensure the procedure is completed correctly. The legal representative may also be available for recommendations and advice.
Filing Chapter 7
For those seeking to wipe away the majority or entirety of debts, Chapter 7 bankruptcy is often used. However, the individual does not need to be penniless or have no income at all for these processes. Income through a job may still be part of the picture if there is an inordinate amount of debts through expenses, loans, mortgage, car payments and other items. To continue with Chapter 7, the person must pass the mean test. It is important to research the entire situation before filling out paperwork, and often a lawyer is needed to ensure certain aspects are possible and part of the event.
The mean test limits who is able to file a Chapter 7 bankruptcy for those that are unable to and cannot pay debts. The mean test utilizes the current monthly expenses and subtracts them from current monthly income earned by the individual. The end result is the disposable income of the applicant. The greater this amount, the less likely it is that a Chapter 7 is possible. This is due to the disposable income paying debts and bills. For the mean test to apply, only an applicant seeking to wipe away consumer debts may progress. Anyone with business debts must seek a different bankruptcy method.
Median Income and Specifics
When the person seeking to complete a Chapter 7 bankruptcy claim has researched the process, he or she may find that his or her income may be more than the median explained in the details. However, when the disposable income is what matters the most, it is possible that he or she may still qualify for a Chapter 7 instead of another. The specific stipulation in uncovering if the person is eligible is to calculate current monthly income versus what is stated as the median income for a household in the state for the size of the family. If it is less, then the individual passes the test. However, if this does exceed the median, then additional stipulations may apply.
Other parts of the mean test may be necessary if the person has more than the median income. The disposable income becomes important in these tests then, and if this leftover income is more than an amount based on the state, the test fails. The amounts permitted such as housing, transportation and other necessities vary based on state and region of the country. It is crucial to know what these are when filing for Chapter 7, as the specifics will determine if the applicant is eligible for Chapter 7 or must use another type for bankruptcy.
Assistance with a Lawyer for Chapter 7
If the applicant is confused, cannot continue alone or has additional needs, it is important to hire a lawyer to help with the processes. A Chapter 7 may wipe away all debts, and it is important to complete the processes properly.
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.