If I make more than the median income in my area, how do I know if I will qualify for chapter 7 bankruptcy?
I am confused about how the means test works for a chapter 7 bankruptcy. I make more than the median income in my area, however my debts are pretty large. My last 6 month's income was about 29K, but my fixed monthly debts are around 4K. That is before food, gas, and all the other random expenses. In the past, I was making well above and beyond my monthly liabilities…but that number has gone down significantly due to circumstances out of my control. I am looking to file chapter 7 bankruptcy and have not been able to find helpful answers online so far. I am out of money and not able to pay my bills. any help would be much appreciated!!!
Trust me you aren't the only one confused. I use software to help me make that determination for my clients because the median income changes at least annually, and it's more complicated than filling out a tax return
But let's put it this way, what the means test looks at is mythical expenses rather than real ones. you look at your gross income, if you are above the median, you then look at your secured debt payments for secured debts you plan to keep, and irs allowed expenses. you also look at mandatory payments, like withholdings, child support, etc. the best way to find out if you qualify is either to go to the bankruptcy court website for your district (the url is usually stdt.uscourts.gov, for example illinois northern district is ilnb.uscourts.gov) and find a blank form for the means test and carefully fill it out.
OR go see a bankruptcy attorney and they can figure it out for you. if your monthly expenses are $4k including credit cards. Stop making the credit card payments so you can save up money to pay an attorney. you will be glad you did as it will be less confusing for you, if you have someone experienced with bankruptcy doing the hard stuff for you and making sure you aren't missing anything.
Even if you can't pass muster with the means test, what this means is that there is a presumption of abuse (of the bankruptcy protection). it is possible to rebut this presumption, but it is not easy, and you better use an attorney if you decide to do this (the attorney will be able to tell you whether it is worth trying to rebut it or if you are better off in a chapter 13).
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