Navigating Chapter 7 bankruptcy necessitates a comprehensive understanding of its intricate procedures to optimize its benefits. A vital phase within this process is the means test. This blog explores the fundamental aspects of the means test and underscores the significance of enlisting the services of an experienced Rockland County Chapter 7 Bankruptcy Lawyer for guidance during these difficult times.
What is the Chapter 7 Means Test and How Do I Pass?
Chapter 7 bankruptcy is a legal process in which your assets are liquidated to repay creditors before having the remainder of eligible debts discharged with the resolution of your case. You should note that with this form of bankruptcy your trustee may seel non-exempt assets to pay off creditors.
If you are considering filing Chapter 7 bankruptcy in New York, it’s crucial to understand that you first need to pass the means test. This calculation is used to determine if a debtor’s income exceeds the state median income for an average family of their size. To pass, you must demonstrate that your disposable income is not high enough to make a reasonable payment to creditors. If your income is less than the state median, you pass the means test and are eligible for Chapter 7.
Nevertheless, if your disposable income is high, you may still qualify for Chapter 7. However, this is only the case if you can demonstrate special circumstances that justify your expenses or adjustments to your current monthly income (CMI). Your CMI is based on your gross income earned over the six months before filing for bankruptcy, multiplied by two.
What Happens if I Fail the Means Test?
It’s important to understand that failing the Chapter 7 bankruptcy means test doesn’t signify the end of your debt relief options. At this point, it’s essential to stay calm and consider alternative avenues for managing your financial obligations. One option is filing for Chapter 13 bankruptcy, which involves creating a repayment plan over three to five years to pay back a portion or all of your outstanding debts. Another option to consider is debt settlement, where you or professional negotiators will collaborate with creditors to agree on a lump-sum payment that is less than the full amount owed.
Furthermore, debt management plans can help you consolidate your debts and make regular payments at potentially lower interest rates. Depending on your unique financial circumstances, you could potentially try again with Chapter 7 at a later time if your financial circumstances have significantly shifted. Consulting with a qualified bankruptcy attorney is highly recommended to assess your situation and determine the most suitable debt relief strategy for your needs.
At The Lauterbach Law Firm, we are prepared to help you navigate the complexities of the bankruptcy process. Connect with our firm today for guidance and skilled representation.
