What Are My Bankruptcy Options If I Cannot Pass the Means Test?
Many individuals who are considering bankruptcy want to file for Chapter 7 bankruptcy. This is a type of liquidation bankruptcy that allows a debtor to obtain a relatively quick discharge of eligible debts and to get a fresh start financially within about half a year from the date of filing. With a liquidation bankruptcy, the debtor’s non-exempt assets are liquidated so that creditors can be paid at least a portion of what they are owed by the trustee. However, in order to be eligible for Chapter 7 bankruptcy, you will need to pass the “means test.” If you cannot pass the means test, under current bankruptcy law, you cannot file for Chapter 7 bankruptcy as an individual (only a business can file Chapter 7 bankruptcy without passing the means test).
If you are in this situation, what are your options? You do have options, to be clear, and our West Palm Beach bankruptcy lawyers can tell you more.
Discuss Your Means Test Results with a Bankruptcy Lawyer
If you have attempted to determine your eligibility for Chapter 7 bankruptcy on your own, you should discuss your means test results with a bankruptcy lawyer as soon as you can — you might actually be eligible depending on how you “took” the test. The means test is essentially a way of making sure an individual debtor’s assets and income are sufficiently limited that it makes sense to allow them to file for liquidation bankruptcy and to receive a relatively quick discharge of eligible debts.
Taking the test can be complicated, however. First, you might actually qualify for Chapter 7 bankruptcy if your current monthly income is less than Florida’s median based on your family size. Determining your current monthly income for bankruptcy purposes is not always straightforward depending on your circumstances, so you should discuss these calculations with a lawyer. Even if your current monthly income does exceed the Florida median income, you can pass the means test by calculating your disposable income and deducting your expenses from it according to several bankruptcy forms. It can be easy to make errors in this process if you are trying to do it alone, so you should work with a lawyer. It may turn out you are in fact eligible for Chapter 7 bankruptcy.
File for Chapter 13 Bankruptcy
If you cannot pass the means test — if your calculations were correct — you can still file for bankruptcy. Rather than filing for liquidation bankruptcy, you will want to discuss a reorganization bankruptcy under Chapter 13 with your bankruptcy attorney instead. With this type of bankruptcy, you can reorganize your debts, and none of your assets will be liquidated.
For many individual debtors, Chapter 13 is often preferable to Chapter 7 bankruptcy because it allows debtors to stop foreclosure and to remain in their homes.
Contact Our West Palm Beach Bankruptcy Attorneys Today
The bankruptcy process is complicated, and it can be difficult to understand your options when you are looking at various websites and doing your own initial research. The best way to have a clear understanding of your eligibility for a particular type of bankruptcy, and what you should expect the bankruptcy process to entail, is to speak with an experienced West Palm Beach bankruptcy attorney at Kelley, Kaplan & Eller. We can discuss your financial circumstances with you today, and we can answer any bankruptcy-related questions you have and help you to move forward with your bankruptcy filing. Contact us today for more information.
Source:
law.cornell.edu/uscode/text/11
