What Is the Means Test in Bankruptcy?

A Chapter 7 bankruptcy filing is the most common type used by individuals throughout Florida and the U.S. It is the quickest and easiest way to eliminate overwhelming debt, such as the unsecured debt of credit cards, payday loans, medical and dental bills, and more. It is done through the liquidation process in which property that is not protected as “exempt” is sold through the bankruptcy court to pay off your creditors. In most cases, debtors taking advantage of this form of bankruptcy get to keep much of their personal property through state or federal exemptions. However, in order to take advantage of the Chapter 7 bankruptcy process, you must qualify.

Want to discharge your overwhelming unsecured debt in Florida? Get legal help for bankruptcy debt relief from The Virga Law Firm, P.A. Call us at (800) 822-5170 to arrange for a consultation.

Eligibility for a Chapter 7 Bankruptcy Filing

In order to be eligible for this type of filing, your income must be low enough. This test was created to ensure that bankruptcy is not abused by high-income individuals. Thus, if you make more than a certain amount of income, you may not be eligible for a Chapter 7. This does not rule out bankruptcy all together, however. You still have the option of filing for a Chapter 13 bankruptcy that consists of a three to five-year repayment plan of one affordable amount through the court to repay creditors. At the end of the plan, if you still owe anyone, that remainder is discharged.

The first step then, in determining if you are eligible for a Chapter 7 filing, is a simple one. Your current monthly income must be less than the median income for a comparable household of your size in Florida. This is done by calculating your income over the past six months. If that income meets this criterion, you can move ahead without further ado. The majority of debtors pass the test at this stage. However, if you do not meet this standard, you will have to go to the next step of the means test.

The Second Part of the Means Test

In the second party of the means test, you will calculate your disposable income after deducting what are called “allowable expenses” from your income. Once again, you will be looking at the last six months.

What expenses are “allowable?’ They can include the following:

  • Rent or housing expense
  • Groceries
  • Clothing
  • Medical or dental costs
  • Taxes on your income
  • Other deductions from your pay that are not voluntary, such as union dues, compulsory retirement programs, required uniforms
  • Insurances, such as health or life insurance
  • Childcare, such as preschool or daycare
  • Alimony or child support payments
  • Education expenses that are required for your job
  • Education expenses for a disabled child
  • Expenses for the care of a family member who is disabled, chronically ill, or elderly
  • Other expenses that fall under special circumstances that must be explained to the court

This can be a complicated process so it pays to be thorough and to have the legal counsel of a knowledgeable attorney to ensure that your case is not thrown out by the court. After going through this step, if your disposable income is demonstrated as being low enough, you will then likely be eligible to file for a Chapter 7.

Get Bankruptcy Help in Florida From The Virga Law Firm, P.A.

To get the education you need on how bankruptcy works, its pros and cons, and what is the best type of bankruptcy for you, it is necessary to work with a lawyer. At The Virga Law Firm, P.A., we serve clients in need of debt relief through bankruptcy. Our legal team has decades of combined legal experience and locations throughout the state, including Fort Walton Beach, Orlando, Panama City, Panama City Beach, Pensacola, and Navarre.

Reach out to us at (800) 822-5170 to arrange to speak with a member of our team today.

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