Rancho Cucamonga Means Test Lawyer
Chapter 7 bankruptcy is a powerful tool for consumers who want to quickly eliminate some of their most burdensome debts. In a matter of six months, you could soon completely wipe out credit card balances, personal loans, and medical debt, among others crippling debts.
Congress was worried too many people were taking advantage of Chapter 7 bankruptcy, especially those with high enough incomes who could afford to pay what they owed. For this reason, they passed reforms in 2005 which created the means test. This is an income test people must pass before they can file for Chapter 7 protection. Contact Wadhwani & Shanfeld if you are interested in discussing bankruptcy. A Rancho Cucamonga means test lawyer can go over the requirements and help you identify whether you can file.
What is the Means Test & Do You Qualify?
Put simply, the means test checks whether your disposable income is low enough to qualify for a Chapter 7 bankruptcy. The test looks at your income, expenses, and the size of your household.
One way to qualify is to compare your income to the state’s median for a family of your size. Every six months, the Office of the U.S. Trustee publishes spreadsheets with this information. In April 2024, for example, the median income in California for one wage earner is $74,819.
If your income is below this median, you automatically pass the means test. Congratulations—you can file for Chapter 7 bankruptcy once you complete the paperwork. Of course, work with a lawyer to see if that is the right option for you. A lawyer will keep on track of the median for California, which changes regularly.
What happens if your income is too high? You can still qualify, but we need to take a deeper dive into your monthly expenses. We must factor in what you spend each month for things like housing, food, utilities, transportation, and other expenses. It’s possible to qualify for Chapter 7 with this alternate method, especially in an expensive state like California.
If you still don’t pass the means test, then Chapter 13 might be your sole remaining option. The Chapter 13 bankruptcy takes longer: three to five years. You make monthly payments to creditors based on your disposable income, and at the end of the payment plan any remaining debt is eliminated.
Some people are exempted from the means test. For example, you might be a veteran, or most of your debt could be business debt you are trying to eliminate in a Chapter 7 liquidation. A seasoned lawyer can review whether you qualify for an exemption.
Are You Interested in Filing for Bankruptcy? Call Us
Chapter 7 bankruptcy has provided a fresh start for millions of Americans and is an attractive option for those with sizable unsecured debts. The means test unfortunately prevents some people from taking advantage of this bankruptcy. Let a Rancho Cucamonga means test lawyer at our firm review whether you can apply. Contact us to schedule a consultation.
