To qualify for Chapter 7 bankruptcy, most people must pass the means test, which looks at their income, expenses and family size to determine if they have any disposable income that could be used to repay debts. Passing the means test often requires making optimal use of allowable expense deductions.
The first step in the means test is to calculate your income from all sources over the past six months. This includes wages, tips, alimony, rental income, interest, unemployment, retirement income and even income from roommates who help pay household expenses. The next step is to double your total income for the six-month period and to compare that figure to the Georgia annual income limits chart on the U.S. Trustee website. The chart shows the state median income levels for different family sizes. You will pass the means test and qualify for Chapter 7 if your income is less than the amount shown in the chart.
If your income is too high, you may be able to deduct expenses to help bring the number down. Gather documentation of your expenses so that your bankruptcy lawyer can evaluate the expenses that can be deducted from your income. Common deductible expenses are:
- Mortgage payments
- Vehicle payments
- Payments you would make on any other secured debt, if you want to keep the item(s) rather than have the trustee sell them to repay your debts
- Overdue taxes
- Alimony and child support, including overdue amounts
- Childcare costs such as daycare and preschool
- Employment-related mandatory expenses such as work uniforms or union dues you are required to pay for yourself
- Cost of health, disability or term life insurance
- Amounts you contribute toward caring for an elderly, disabled or chronically ill member of your household
- Amounts spent on education for employment of a child who is mentally or physically disabled
If deducting these allowable expenses brings your income figure down below the state median income shown in the chart, then you pass the means test and are eligible to file a Chapter 7. If the number is still too high to qualify, you may have to file a Chapter 13 instead, which requires committing to a repayment plan for some of your debts. Alternatively, you could wait another six months and take the means test again if you think the delay could affect your income or expenses. Completing the Chapter 7 means test and all the related paperwork is something you should do with the help of a qualified Georgia bankruptcy lawyer.
At Jeff Field & Associates, we help people complete the Chapter 7 means test and provide advice on which debt relief options are the right fit for each individual client. Please call 404-381-1278 or contact us online to schedule a free consultation with a lawyer in our offices in Athens, Douglasville, Gainesville, Lawrenceville, Marietta or Scottdale.