Many potential bankruptcy clients come to my Asheville office wondering whether they qualify for a Chapter 7 or Chapter 13 case (sometimes Chapter 11, but that type of case is generally for big companies with many employees or assets). The key qualifier for determining the proper type of bankruptcy relief is called the Means Test.
The Means Test looks backward in time at your gross income for the previous 6 months prior to filing your petition. So, if you filed in April, the test would cover October 2011 through March 2012. If you filed on May 1, the test would cover November 2011 through April 2012. Many times, I will recommend filing earlier or later for folks whose income fluctuates (commission based jobs, etc.).
If your gross income is below the median level for your household size, you qualify for both Chapter 7 and Chapter 13 relief. If your income is above the median, you still may qualify for either chapter, but we would need to look at your household expenses to determine if Chapter 7 is still a possibility for you. Generally, if you have kids, your chances are still pretty good. Kids cost a lot of money to raise, and the Means Test allows for that fact.
If you fail the Means Test, after looking at your expenses, you almost certainly still qualify for Chapter 13 relief. The Means Test is very important in Chapter 13 cases because it determines your “disposable income.” Disposable income is a key factor in determining how much you have to pay in a Chapter 13 payback plan (the other key factor is the assets you own).
Sound complicated? It is a bit tricky for those of you not familiar with the system. However, you can learn what a bankruptcy case would look like for you during a free, initial consultation. Contact me today to get on my calendar.
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