The “Means Test” When You’re Filing for Chapter 7 Bankruptcy

Getting a Small Business Loan After a Bankruptcy

The “Means Test” When You’re Filing for Chapter 7 Bankruptcy

Chapter 7 Bankruptcy can become a complicated matter with many aspects that need to be considered but it doesn’t have to be overly complex. With the help of an attorney, you will be able to navigate this process with no problem. If you are looking to file for Chapter 7 bankruptcy, you will have to endure something known as the “means test,” which will dictate whether or not you will be able to file.

What is the Means Test?  

If you plan on filing for Chapter 7 bankruptcy, you will have to prepare yourself for the means test. This is a requirement that will decide whether or not you are eligible to file based on the state’s income standards. This type of test might initially seem confusing to you, but when it is broken down, everything starts to make sense. You will have to file two different forms to determine how much income you have:

  • Chapter 7 Statement of Your Current Monthly Income, or Form 122A-1
  • Chapter 7 Means Test Calculation, or Form 122A-2

Form 122A-1: This specific form focuses on your marital or filing status and the income that you make monthly compared to what the median income lies at in your state. If you are an individual filing for Chapter 7, you will need to fill out this form. If you are filing with your spouse, you could either have to fill out the same form or file separately.

To fill out your wages, you will have to add up your income over the past six months from any sources you have. Then, you divide each six-month total by six to get your average monthly income. Of course, there are many other aspects that will come into play, but this is the part that the majority of people struggle with.

Form 122A-2: This is the means test calculation, which calculates your disposable income based on your overall income and expenses on a monthly level. If the first form you filled out shows that your income is higher than the median in your state, you will be required to fill out this form. If the numbers continue to come out too high, you might be presumed to have too much income and you might be ineligible from filing for Chapter 7 bankruptcy.

What if I Pass?  

The “Means Test” When You’re Filing for Chapter 7 BankruptcyPassing the means test does not always imply that you will automatically qualify for Chapter 7 bankruptcy. After you pass, you will still have to endure the process of bankruptcy counseling, filing with the court, and attending your creditor meeting. Anything can happen through these various steps, which is why you must always be prepared. You should consider your bankruptcy options from all angles before you move forward.

You have many options when it comes to declaring bankruptcy. If a Chapter 7 declaration is not for you, there are other options for those who own businesses. At MJ Watson & Associates, our experienced bankruptcy attorneys in Texas are qualified to help you through this difficult time as you move forward with the bankruptcy process and attempt to get back on track in your business. Many people might feel helpless and confused but you don’t have to stand alone. Please contact us for more information at (214) 965-8240.

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