When you want to file for bankruptcy, it’s essential to understand your options. As a consumer, you will likely proceed with Chapter 7 or 13 filing. However, to qualify for Chapter 7, you must pass a means test to proceed. Unfortunately, many are unfamiliar with what this test entails, so the following blog explores some of the most common questions surrounding this process. You’ll also discover how a Memphis, TN Chapter 7 bankruptcy lawyer can help you during this confusing process.
What Is the Means Test in a Bankruptcy Case?
If you wish to pursue Chapter 7 bankruptcy when filing, you must first pass a means test. Generally, this is a calculation that determines whether or not you are eligible to proceed with Chapter 7 bankruptcy. If you have the income to pay off the debt you owe, you will be ineligible for this Chapter and must pursue Chapter 13.
Generally, this will compare your average income to the median income of other households in Tennessee. As such, any dependents on your tax report are considered a part of your household. If you are below the average, you will qualify. It’s also important to note that this average can change every six months.
What Income Is Considered?
In Tennessee, it’s necessary to understand what income will be considered when calculating your ability to pay debts. This is because not all payments you receive are included. Common examples of income taken into consideration during this test include, but are not limited to, the following:
- Salaried earnings
- Hourly earnings
- Overtime payments
- Retirement payments
- Freelance work (anything filed using a 1099)
- Worker’s Compensation
- Unemployment payments
It’s also important to understand that specific forms of disability payment, like Social Security retirement, Social Security Disability, and Supplemental Security Income, are all generally excluded from the means test because they fall under the Social Security Act.
If I Want to File Bankruptcy, What Should I Do?
After considering your options, if you’ve decided that bankruptcy is the best avenue for you to pursue, it is in your best interest to consult an experienced lawyer. Unfortunately, you may find that navigating this process is incredibly complex and confusing, as many documents must be completed correctly and filed on time. As such, having an attorney to help you through these matters is an invaluable asset.
Additionally, your attorney can help you get the necessary documentation to show you have completed the means test and qualify for Chapter 7. If you do not qualify, your lawyer can help you pursue other options.
At the Arnold Law Firm, we understand how complex bankruptcy can be. That’s why our team is committed to guiding you through this issue so you can receive the financial relief necessary to shed the debt you’re carrying. Reach out to our firm to schedule a free consultation with a member of our team.