Alfred Abel Discusses the Means Test and Chapter 7 Bankruptcy
One of the main tasks of a Philadelphia Chapter 7 bankruptcy attorney is helping our clients understand which forms of bankruptcy they may qualify for. Many people want Chapter 7, because this form is relatively quick compared to Chapter 13 bankruptcy.
To be able to qualify for Chapter 7, you must pass the “means test,” demonstrating that you legitimately do not have the means to pay back your debts. Here is some vital information you should know about this test from our team at Alfred Abel Law Offices.
A Chapter 7 Bankruptcy Lawyer Explains The “Means Test”
If you have a low income level, passing the test is quite simple: if your household income is less than the median household income for Pennsylvania as a whole, then you pass the means test. To give you a ballpark estimate on those numbers, as things stand, a single-person household in PA would need to make less than $4222.25 per month, while a four-person household would need to be under $7803.75 per month.
Further, two situations exist where you can bypass the test entirely:
- You are a disabled military veteran or reservist, or;
- You are filing for business Chapter 7 bankruptcy, meaning your business debts are greater than your personal/household debts.
However, for those who do need to take the means test, a few catches exist which you should know about. The law uses a very broad definition of the word “income,” which goes well beyond your simple take-home paycheck. In addition to your standard job wages, all of the following will also be included as part of your income for the purposes of the means test if they occurred within the last six months:
- Any gambling earnings
- Being paid rent by a roommate or housemate
- Receiving disability benefits via private insurance
- Receiving monetary gifts from friends or relatives
- Having friends or relatives pay bills on your behalf
- Taking money out of an IRA or 401(k)
- Receiving child support or other spousal support (Note: you must actually receive the support; unpaid support does not count.)
Another potential wrinkle comes from the definition of “household size.” Disagreement does exist within court precedent over who can qualify as a member of your household. Household size can become important if you are taking on a boarder or have a housemate who is not an immediate part of your family.
In short, the calculations of your household income can become complicated, but correctly assessing your income is vital for determining whether you can file for Chapter 7. In some cases, you may need to delay filing.
You Need an Experienced Philadelphia Chapter 7 Bankruptcy Lawyer
Filing for bankruptcy can be a difficult and overwhelming process, and you need professional help to ensure you have the best chance of success. Contact Alfred Abel Law Offices today for a consultation with a Chapter 7 bankruptcy lawyer regarding your options.