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The Means Test

Work with a Long Island Bankruptcy Lawyer

Bankruptcy is a last resort for many individuals, couples and business owners that are no longer able to keep a handle on their finances. The cost of living in Long Island is high and with the negative toll on the economy, almost everyone can feel the effects in some way. For those looking to deal with their debt, there are several options available. Some of these are more extreme than others and should be properly researched before pursuing them. Bankruptcy is a more extreme form of debt relief but is the best option for many people. While it can initially seem harsh, it allows many people to begin again and eventually get started on rebuilding their credit.

For those looking to file for bankruptcy, there is more than just one form. Chapter 13 is the less common one, and is typically for those that have a steady source of income. While they may be struggling from their expenses, they could eventually pay for them with some help. Chapter 7 is the more widely known form and is the liquidation of assets that many people begin to cringe over when they hear. It is actually highly beneficial for many people that file for it and can provide them with a fresh start they need.

Chapter 7 and the Means Test

Before getting started, those looking to file will need to pass the means test. This is a test that has been established by the government in order to regulate can files. Bankruptcy is really meant for those with extreme debt and the means test looks to keep this in order. The means test got its name from its assessment of looking to determine who has the means of paying the expenses they owe. Some individuals may be able to rid themselves of debt without filing under Chapter 7. The test was added in 2005 and assesses the average income in the area. Those that are found to be above this level will likely be unable to apply. The average income is usually based off the state that the individual lives in or is filing in.

For those that do pass the test, they can then file for Chapter 7. This can allow them to wipe out more of a significant portion of their debts. It is the liquidation form of bankruptcy, through which a number of assets are taken and used to pay off expenses. It is still important to work with a professional before doing this. Eligibility for filling under Chapter 7 does not mean it is what should be done in every case. Many people will be ineligible to file under Chapter 7 but can still file under Chapter 13. This is a better option for some, as it will allow them to keep most of their assets. It combines payments into a sum that will be paid towards each month. To find out if you qualify you can use an online calculator or speak with a Long Island bankruptcy attorney.

Filing out a Bankruptcy Form

A Bankruptcy Form 22A must be filled out to petition for Chapter 7. Total income from the past six month should be listed, including interest, wages and more. You will need to include your average income during the last six month and if the amount differed then each month should be added together and divided by six. Your annualized income will be compared to the average income of a family your size. If you pass this portion then you can check the box on line 15 that says your amount listed on line 13 is equal or below the amount listed on line 14. Next your expenses will be examined and you will need to include average life expenses such as insurance and taxes. Your monthly disposable income will then need to be determined and included on line 50. For line 51, you will simply multiply your monthly disposable income by 60.

You can now pass or fail the initial presumption determination by reviewing if the amount you entered on line 51 is less than $7,025, greater than $11,725 or in between the two amounts. You can also pass or fail the secondary presumption determination by reviewing if the amount you entered on line 51 is less than, equal to or greater than the amount on line 54. The process can be complex and it is important to carry it out correctly. There has been much debate over the means test and whether its use is justified or not. It is recommended that you work with an attorney from our firm and consult with them from the beginning to help determine if you are eligible to file, or if an alternative to bankruptcy is a better option for your needs. We can also aid you in filling out a Bankruptcy Form 22A correctly.

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