What is the Bankruptcy Means Test and How Does it Work?

What is the Bankruptcy Means Test and How Does it Work?

Posted By Owenby Law, P.A. || 27-Oct-2015

Deciding to file for bankruptcy is a big decision and sometimes a daunting process. You may be afraid of how it will affect your current living situation and even your future. That is why Owenby Law, P.A. is here to assist you through every step of the process. The more informed you are about what to expect, the more comfortable you will be and the easier the process will be to handle.

Before bankruptcy, a person will undergo a U.S. Bankruptcy Code “means test” to determine what type of bankruptcy will be most effective and affordable based off their circumstances. If a person in unable to make the payments required in a Chapter13, they will need to file a Chapter 7, often referred to as liquidation.

To help you understand the means test process, we have listed the various steps:

1. Compare your household income to the median income for a family the same size as your own

The current annual adjusted income data based on different family sizes in Florida is listed below:

  • Single person household = $40,029
  • Two person household = $50,130
  • Three person household = $54,594
  • Four (or more) person household = $65,135

It is important to keep in mind that these numbers are calculated using the gross income, the amount earned before taxes is deducted. In addition, the amount of persons per household is the sum of the entire household not just the person(s) filing for bankruptcy.

2. Expenses are subtracted from the gross income, calculating your disposable income

If the projected disposable income for the following five years is less than $100 a month, more than likely, you will qualify to file under Chapter 7. However, if you have more than $10,000 in projected disposable income, most likely, you will be ineligible for Chapter 7.

The Internal Revenue Service will permit you to deduct certain expenses, which can reduce your projected disposable income, to help you qualify for Chapter 7. Some of the expenses you will be allowed to deduct are the following:

  • Certain health care expenses
  • Certain dental costs
  • Child support
  • Vehicle payments
  • Alimony payments

Have More Questions Regarding Bankruptcy? Contact Owenby Law, P.A. Today!

At Owenby Law, P.A., our Jacksonville bankruptcy attorneys understand how challenging life can be when you and your family are experiencing financial hardships. We are here to see that you are able to regain your financial freedom so that you can start living the life you have always wanted. When you become our client, we will take the time to discuss all available options and help you get the financial help you need.

Call our Jacksonville bankruptcy lawyers and let us handle your financial issues today!

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