Why Chapter 7 Bankruptcy Is Contingent Upon Means Testing

Why Chapter 7 Bankruptcy Is Contingent Upon Means Testing

January 24, 2020

Chapter 7 bankruptcy is a desirable choice for many, given that a successful filing completely discharges any personal liability to pay off consumer debts. However, Chapter 7 bankruptcy eligibility in Montgomery County, TX doesn’t extend to everyone—it’s designed for those experiencing severe financial hardship, who don’t have the means to pay off their debts. Filing for Chapter 7 requires means testing in Montgomery County, TX—a test to determine whether you qualify under Chapter 7’s strict standards.

What is means testing?

Chapter 7 bankruptcy’s “means test” is the way the court decides whether you’re able to pay off your debts. It’s designed for indigent people who have no hope of paying off their personal consumer debt ordinarily. If you file for Chapter 7 and find that you don’t qualify later, you can always switch your filing to Chapter 13 bankruptcy.

What factors does means testing include?

The first facet of the test is whether your income falls below the median income for a similarly-sized household in your state. If it does, then you can go ahead and file under Chapter 7, no questions asked.

Things get more complicated when you make more than the median income—it’s not a bar to filing for Chapter 7, but you’ll need to jump through a few more hoops.

At this point, you’ll need to determine what the court considers your “disposable income.” This is done by subtracting your monthly expenses from your monthly income. There are online calculators to help determine this, but your attorney will be better able to advise you. Some qualifying expenses that offset a higher income might be:

  • Your mortgage: Your mortgage payments may be a payment you can deduct from your monthly income, depending on your state and county.
  • Providing care for the elderly or disabled: If you’re providing care for a family member who can’t take care of themselves, the court generally takes those expenses into consideration.
  • Taxes: Any tax bills or tax payments you have will be subtracted from your monthly income.
  • Childcare: Most American parents need some sort of childcare to care for their kids while they work. Courts will usually deduct these expenses from your income.
  • Multiple car payments: Finally, if you have multiple car payments—and multiple family members who need those cars—you should be able to get them subtracted from your monthly income. As long as they’re not outrageous luxury cars, the courts understand your need for transportation.

File for Chapter 7 bankruptcy in Montgomery County, TX

Wondering about your Chapter 7 bankruptcy eligibility in Montgomery County, TX? You need the help of an experienced attorney. The Law Office of James R. Jones, Attorney at Law has been handling bankruptcy cases in state and federal courts since 1993. We’re glad to provide you a free 30-minute consultation to discuss your case, whether you can file for Chapter 7 and what your options may look like. Call us today to get started on the process of getting out from under your debt.

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