A means test is a required step to filing for bankruptcy. Its purpose is to determine if you have the means to pay off all or some of your debt. A means test will compare you disposable income to the amount of debt you owe along with the income of other people in your area. If you are considering filing bankruptcy in Miami, here are few tips to make sure your means test accurately reflects your financial situation.
- Find out the median income in your state. This is a sliding scale for the number of people in your house hold. If your income is below your states median income, you will most likely pass with no questions asked just so long as you have a substantial amount of consumer debt.
- Before you hire a bankruptcy lawyer, use on line means test calculator. They are usually free and can be found on the web pages of some bankruptcy lawyers. This free tool will give you a good indication as to whether you will qualify for Chapter 7 bankruptcy. Keep in mind, if you do pass the test, it does not mean you have to file for bankruptcy, or even that you should. Every person’s financial troubles are different. Contact a bankruptcy attorney who can help you sort through your options.
- Make sure you are honest about your expenses and required monthly payments. There are a lot of “tips” on the internet that tell you to increase charity contributions or add as much money to your 401k as you can because these payments are deducted from your taxable income and will make it look like you make less than you do. This is a mistake. While these steps might help you pass the means test now, you might be liable for fraud for abusing the bankruptcy system later. Bankruptcy is a tool meant to help hard working people who really need it, not to reward over spenders who know how to work the system. Being honest will protect you from legal issues down the road.
- Be sure to include all of your monthly expenses. Go through your financial documentation thoroughly and make sure you do not leave any thing out. Car payments, credit cards, student loan payments, life insurance policy payments, home owners association, etc. If you forget any payments you risk not passing the means test bankruptcy level of income and could be rejected.
- Do not get stressed out about the means test. If you have looked at your fiances honestly and cut back where you could but still cannot pay your debts, you will probably pass the means test. If you do not pass it does not just mean that you cannot file for Chapter 7 bankruptcy, it also means that you do not need to! Bankruptcy is a financially devastating process, so this is good news! There are many other options available for debt relief if you do not pass the means test.