When a person makes the decision to file for bankruptcy, it is because the amount of debt they are facing is so severe that there are no other options available – merely consolidating debt or creating a budget won’t do it. That being said, some people who file for bankruptcy have fewer means than others, and therefore may be eligible for a different type of bankruptcy filing. In order to determine this, the means test is used. Waltham bankruptcy lawyer David McLoon can help you to understand the means test and how to navigate it. 

Chapter 7 Bankruptcy and the Means Test

Chapter 7 bankruptcy is one of the two most common types of personal bankruptcy – the other is Chapter 13. While both bankruptcy filing options can provide debtors with the relief that they need, Chapter 13 involves creating a repayment plan, whereas in Chapter 7, many debts are forgiven. Only those who do not have the income and means to pay back debts are allowed to file for Chapter 7 bankruptcy. If a person has too much disposable income, they won’t be allowed to use Chapter 7 bankruptcy, and instead will need to file a Chapter 13. 

The Means Test: Determining if Your Income Is More than the State Median

The first part of the means test is determining whether or not your income is more than the state median. If your income is less than the state median, then you pass the means test. If your income is more than the state median, you may still qualify for a Chapter 7 bankruptcy if you can prove that you do not have the disposable income that’s necessary to repay a portion of your debts. 

What’s Your Disposable Income? 

If your income is more than the state median, the next question will be that of whether or not you have enough disposable income to repay some of your debts. In order to answer this, you’ll need to fill out a Form 122A-2. Filling out this form requires a calculation of your determined adjusted income and information about your debts and expenses. You’ll need to provide information about any number of dependents you support and the number of people you can claim as exemptions, names of all creditors and secured and unsecured debts, court-ordered payments, monthly expenses for all basic living necessities, childcare costs, and more. If the means test shows that you have too much disposable income, you will be precluded from filing for Chapter 7 bankruptcy.

Working with an Experienced Waltham Bankruptcy Lawyer Can Help

Understanding what your bankruptcy filing options are and knowing how to navigate the process can be confusing. Attorney David McLoon has the experience and the know-how that you’re looking for in a Waltham bankruptcy lawyer. If you have questions or are ready to start filing for bankruptcy, protect your best interests by calling Attorney McLoon today. You can also request a case review online or by visiting his office in person.