Means Test

Experienced Bankruptcy Attorney Serving Residents of Los Angeles

If you are coping with the heavy burden of consumer debt, you may be interested in filing for Chapter 7 bankruptcy. In this process, most of your consumer debts can be discharged in a relatively short period of time of three or four months. This means you will no longer owe unsecured debts, such as medical debt or credit card debt, and you can start over with a fresh slate. Skilled bankruptcy lawyer Devin Sawdayi can help Los Angeles residents decide whether they are eligible to file for Chapter 7, based on applying factors like the means test.

Understanding the Means Test

The means test looks at whether your income is low enough to justify filing for Chapter 7 bankruptcy. It is a test designed to keep those with very high incomes who do have the means to pay off their debts from avoiding repayment of their debts by filing for Chapter 7. Those whose incomes are too high to file for this process can still file for Chapter 13 bankruptcy, in which the filer repays debts over three to five years.

You do not have to be indigent to pass the means test. The first question you must answer is whether your current monthly income is more or less than California's median income for a household of your size. You can determine this by averaging your monthly gross income for the six months before filing. The income you use will need to match what you submit on your bankruptcy paperwork. In calculating your current monthly income, you do not include the month in which you will be filing. If you are receiving Social Security income, you should not include this income in your calculations. If your calculated current monthly income is less than California's median income, you qualify. You can file for Chapter 7.

However, if you earn more than the median, the formula deducts certain necessary monthly expenses from your current monthly income over the six months before you file a bankruptcy petition to arrive at your disposable income. The allowance of necessary expenses, including housing, transportation, food, clothing, medical care, and more, varies based on the metropolitan area or county. Those who have significant disposable income are unlikely to qualify.

Not everyone who passes the means test should file for Chapter 7 bankruptcy. For those who have just a few creditors, it may be possible to negotiate with your creditors. People who want to keep their homes, vehicles and other possessions may also lack the necessary incentive to file for Chapter 7. Those who want to cure a default on a mortgage are usually better off filing for Chapter 13 bankruptcy if they have the capacity to pay.

Explore Your Options for Financial Reorganization with a Los Angeles Lawyer

There are many potential pitfalls when Los Angeles debtors do the means test without legal assistance. Instead, you should contact experienced bankruptcy attorney Devin Sawdayi for help deciding what to do in your particular situation. In some cases, even when you can file for Chapter 7, it may not be the prudent option. In other cases, you may be able to negotiate with creditors to avoid bankruptcy altogether. If you do qualify for Chapter 7, we can help you keep as much of your property as possible and make sure that you receive the greatest possible discharge of your consumer debts. Contact Devin Sawdayi at 310-475-9399 or via our online form for help.