Qualifying for Bankruptcy After Failing the Means Test
Understanding the Means Test
The means test is a crucial component of the bankruptcy process, designed to determine whether an individual has enough disposable income to pay back some of their debts. The test evaluates your average monthly income against the median income for a household of your size in your state. If your income exceeds the median, then further calculations are necessary to determine your disposable income.
What Happens When You Fail the Means Test?
Failing the means test primarily suggests that your income level is too high to file for Chapter 7 bankruptcy, which is commonly used to eliminate unsecured debts like credit card debt. However, this does not mean you cannot seek bankruptcy protection; you may still qualify for Chapter 13 bankruptcy. In Chapter 13, you'll create a repayment plan to pay back some or all of your debts over a period of three to five years.
Exploring Alternatives
If bankruptcy isn't an option after failing the means test, other alternatives should be considered. Debt consolidation could help manage payments by combining multiple debts into one, often with a lower interest rate. Credit counseling services can also provide guidance and may offer structured debt management programs.
Consult with a Legal Professional
It's essential to consult with a bankruptcy attorney after failing the means test. Legal professionals can help evaluate your financial situation, explore possible exemptions that might apply, or check for errors in the calculation that might have led to failing the test. An attorney can guide you on the best next steps, whether it involves considering Chapter 13, exploring other financial solutions, or potentially refiling after correcting any mistakes.
The Importance of Seeking Guidance
Bankruptcy laws are complex, and the means test is just one part of the process. Understanding your options and the long-term implications is vital for making informed decisions. Professional advice can provide clarity, ensuring that you take action in a manner that best suits your financial health and future stability.