Living with an overwhelming amount of consumer debt can be a huge burden on a day-to-day basis. Regardless of how you found yourself in this position, no one deserves the harassing creditor calls, the bills that pile up as you prioritize which bills you can and cannot pay, and having to sell off sentimental items just to pay down your interest obligations. Many people who find themselves saddled with insurmountable consumer debt find Chapter 7 Bankruptcy a desirable option.
Chapter 7 involves the sale of non-exempt property by a trustee in order to satisfy creditors. It is a popular method of debt relief because it only takes three to six months to obtain a discharge order in many cases. This is in contrast to other forms of bankruptcy that involve a years-long repayment plan. However, in order to qualify for discharge under Chapter 7, you must pass the “means test”.
What is the Means Test?
The Means Test is a calculation that individuals with primarily consumer debt must undergo to qualify for Chapter 7 protections. Essentially, the test looks to whether a debtor is actually in need of bankruptcy relief, or if they actually have enough disposable income to put toward their debts. Notably, failure to qualify under the means test effectively leaves Chapter 13 bankruptcy as the only option for those debtors.
First, the means test examines your average monthly income for the six months preceding your filing. This is then compared to the median income for your state, based on the number of household members in your home. For example, the US Census stated that New Jersey’s median household income for the purposes of the means test is $79,363.00 for a family of two. It is one of the highest in the country. If your average monthly household income is below the state’s median, then you qualify to seek Chapter 7 bankruptcy.
If your average monthly income is above the state median, then the means test becomes harder to pass. For these debtors, the test then focuses on the debtor’s qualifying monthly expenses and subtracts this from the debtor’s monthly income. This produces the debtor’s disposable monthly income. If this disposable income is too high, then you will not qualify for Chapter 7, as it is presumed that this money could be used toward outstanding debts.
You Need an Attorney to Defend Your Legal Rights
Debt cancellation through bankruptcy can be an incredible source of relief. However, it is important to be fully aware of your options, and the benefits and risks of the decisions before you. Contact Levitt & Slafkes, P.C., today. Our attorneys have decades of experience in guiding clients through the complex bankruptcy process. We take pride in communicating with our clients and proving them the information they need to make smart, informed decisions. Contact our office at (973) 323-2953, or contact us online to schedule an appointment.