Sometimes no matter how hard you work and how disciplined you are with your spending, debt can build up. Payments may be manageable at first, but it might become impossible to ever make progress on paying off what you owe. In these situations, it may be wise to research your bankruptcy options. You’ll need to consider which chapter will benefit you most, and when we meet, one of the first things we’ll do is conduct the means test. This calculation looks at your income, debt, and assets to determine if you’re eligible for a Chapter 7 bankruptcy. Filing a Chapter 7 is the quickest, easiest way to discharge your unsecured debts, but if you don’t qualify, you still have options. If you have significant income, but can’t keep up with your payments, a Chapter 13 will put you on a reduced repayment plan for three to five years, based on your income. After your plan is completed, most of your remaining debts are discharged, greatly reducing the total you’ll pay.
Means Test Forms
Your specific situation will determine the forms we’ll use to decide which chapter is best for you to file. First, we’ll complete the Chapter 7 Statement of Your Current Monthly Income (Form 122A-1.) This allows us to compare your total income to the median income for a household of similar size in your area. If your income is below the median, you automatically qualify for a Chapter 7, and no more Means Test forms are required. Form 122A-1 Supp is where you can list if your debts are primarily business related, you’re a disabled veteran, or you’re in the National Guard or armed services reserves. If you fit these criteria, you are eligible for a Chapter 7, no matter your income level. The final option is to complete Form 122A-2, which calculates your disposable income. If you do not have enough disposable income, or the “means,” to pay off your debts in a reasonable time, you pass the Means Test and can file a Chapter 7. If you do not pass the test, you can still file a Chapter 13 bankruptcy.
Preparing the Forms
I’ll need you to have your income information handy as we prepare to complete your bankruptcy forms, and I’ll provide a list of possible sources of income so that nothing is missed. We’ll indicate if you’re filing as married filing jointly, married filing as an individual, or single. Each filing option has different consequences, which we can discuss, and each status determines the income that you’ll need to include. If you’re married and filing with your spouse, all of your income for six months prior to filing must be included. “Income” could be wages from jobs, unemployment, child support/alimony you receive, retirement, rental property income, or earned interest. Social Security is not included here, but is listed on another form. This total is what’s compared to your state’s median income to guide our form completion.
Focus on the Future
One of the many benefits of having an attorney handle your bankruptcy case is that you won’t need to worry about missed or incomplete forms. I’ll use my years of experience to guide your filing decisions and ensure your case is resolved without any issues. You’ll be freed up to focus on making a new financial start.