One of the early steps in the bankruptcy process may be the means test. This test is complicated, but it plays an important role in both Chapter 7 and Chapter 13. At Balbus Law Firm, you will work with a lawyer who has extensive skill in navigating the bankruptcy means test in Connecticut and New York.

The Role Of The Means Test In Bankruptcy

There are three ways for an individual to qualify for Chapter 7. First, if your non consumer debt exceeds your consumer debt, you may qualify. This applies mostly to sole proprietors with business debts. For consumers, you must either have an income that is lower than the state median income for your household size or you must qualify through the means test. If you do not qualify for Chapter 7, you will likely be eligible for Chapter 13. The results of the means test will show what portion of your income will be used to pay creditors through a Chapter 13 plan.

How The Means Test Works

The means test starts with your actual current monthly gross income and then applies expense deductions that are objective, that is, everyone who lives in the same county gets the same deductions for certain expenses such as food, clothing, housing and car ownership. The objective deductions are based upon IRS allowances for offers in compromise.

The means test then applies certain deductions for expenses in particular categories that are based on what your actual, provable expenses are in those categories, including payments on secured debts, such as car loans and mortgages (above relevant IRS allowances), payments on priority claims, such as tax claims and child support obligations, child care, certain dependent care, withholding taxes, health care and term life insurance.

The means test is extraordinarily complicated. It is important that you choose an attorney who understands the various means test deductions in order to ensure that you qualify for Chapter 7 if appropriate.

To Learn Whether The Means Test Applies To You, Contact Us For a Free Initial Consultation

To learn about the means test in a free initial consultation, call 203-286-4181 or email us.

Balbus Law Firm is a debt relief agency. We help people and businesses in New York and Connecticut file for bankruptcy relief under the Bankruptcy Code.