New bankruptcy laws were established on October 17, 2005 which created many new rules, and amendments to existing rules. Perhaps the single greatest change was the creation of the “means test” to determine whether individuals are eligible to eliminate their debt under a Chapter 7 bankruptcy filing. Many of the creditors out there, such as the huge credit card companies, felt this change was a major success. The means test is intended to limit the amount of individuals and families which are eligible to file aChapter 7bankruptcy and shift them over to filing a Chapter 13 instead. Of course this is a huge myth that many people now think they can only file a Chapter 13because they “make too much money.”
The real fact is that most people are still eligible to file for a Chapter 7bankruptcy. The new law is definitely restrictive and has an overall limiting effect, however it simply doesn’t stop most people from still filing aChapter 7bankruptcy.
At Dodge & Vega you can expect an honest consultation where you can receive answers to all of your questions and find out if you are eligible for a Chapter 7bankruptcy. We will do a means test with you in our consultation! It’s important to seek qualified and professional advice from a reputable bankruptcy attorney in order to determine your eligibility for a
Chapter 7 bankruptcy. Many firms will not see how you are in fact eligible and push you into a
Chapter 13, or some sort of debt settlement plan. Don’t be fooled by an over aggressive attorney or a pushy paralegal.
We accept all major credit cards and payment plans are available.
Because there are so many options regarding debt relief and bankruptcy is only one of those options, it is important to understand the means test andhow it applies to your particular situation. A basic means test used below give you a general idea of how the new bankruptcy laws may affect you. Of course, the results of this example test are not meant to be the final word for you. Our lawyers will give you honest answers about whether bankruptcy is even the right solution for you.
Here is a nutshell summary of the new laws:
- Within six months before filing, you must take an approved financial management course. And after filing you must take a second part of this course. Both of these certificates of completion must be filed with the bankruptcy court. Our office will of course file these for you.
- If your current monthly income is less than the median income in the state where your residence is then you are basically automatically eligible to file for Chapter 7 bankruptcy.
- If your current monthly income is more than the median income in the state of your residence then you must apply a means test:
Here is a simplified version of the new Means Test and an easy to understand chart:
Step 1: Subtract your necessary monthly living expenses (see Schedule J) expenses from your $ monthly net income =
Step 2: Then multiply N
x 60 = X
Step 3: If X is greater than $10,000, or 25% of your consumer debt, then you are only eligible to file Chapter 13 debt reorganization.
If X of step 2 is less than $6,000, or 25% of your debt, then you are eligible to file Chapter 7 for consumer debt to eliminate your unsecured debt.
***This is a very simple version of a complicated means test. Please seek legal counsel for your particular situation to determine whether or not you are eligible for a Chapter 7 bankruptcy. There are additional factors that may or may not apply in your case which can help qualify you for a Chapter 7 bankruptcy.