Bankruptcy Law Firm Representing Clients in Oklahoma City Who Pass the Means Test
The means test is a tool that is used to determine whether or not an individual qualifies for Chapter 7 bankruptcy based on their monthly income. This test was designed to prevent people with the means to repay their debts from qualifying for Chapter 7 bankruptcy. As a result, the test ensures that Chapter 7 bankruptcy is only available to those who truly need it.
If you are thinking about filing for Chapter 7, it’s important to understand how the means test works and whether or not you pass it. To find out if you qualify, schedule a free consultation with the experienced bankruptcy means test attorneys at Mitchell & Hammond.
An Overview of the Steps Involved in the Means Test
There are two main steps in the means test:
- Monthly Income Comparison
- Disposable Income Determination
The first step involves comparing your monthly income to the median monthly income for a similarly sized household in Oklahoma. The median monthly incomes for households in Oklahoma is adjusted annually, so it’s important to make sure you are using the most recent data. If your income is lower than the median income for a household of your size, you pass the means test. You will not have to move onto the next step unless your income is higher than the median income for a household of your size.
The second step involves calculating your disposable income, which is the income you have left after paying certain expenses. To calculate your disposable income, you will need to deduct certain expenses from your monthly income. Some examples of the expenses that can be subtracted include:
- Housing costs
- Cost of childcare
- Insurance
- Taxes
You will be left with your disposable income after subtracting these expenses from your monthly income. If your disposable income is below a certain number, you will qualify for Chapter 7. The disposable income limits can vary depending on the city or county, so ask an attorney for assistance with the means test.
How to Calculate Monthly Income in the Means Test
Your eligibility for Chapter 7 bankruptcy will hinge primarily on your income. This is why it’s so important to know what types of income you should include when calculating your monthly income for the means test.
The monthly income you will use to perform the means test is calculated by taking an average of the income you have earned over the six months prior to filing for bankruptcy. To calculate this average, add up all of the income you have earned during this six-month period and then divide the total by six to find the average.
Most types of income that you earned during this six-month period must be added, including:
- Wages
- Bonuses
- Tips
- Commissions
- Interest
- Dividends
- Income from rental properties
- Retirement income
- Child support
- Alimony
- Unemployment benefits
- Workers’ compensation benefits
There are several types of income that should not be included when calculating your monthly income for the means test. This includes:
- Social Security retirement benefits
- Social Security disability benefits
- Restitution payments that were awarded to you because you were a victim of a crime
Determining your monthly income is fairly simple if you receive a paycheck every two weeks from the same employer. But it is much more difficult if you receive irregular payments, such as commission checks, tips, or performance-based bonuses. Fortunately, an attorney can review your finances, help you calculate your monthly income, and complete the means test to determine whether or not you are eligible for Chapter 7.
Who is Exempt From the Means Testing Requirement in Oklahoma?
Most individuals will need to pass the means test to qualify for Chapter 7, but there are some exceptions to this rule. These exceptions include:
- Disabled veterans who incurred a minimum of 50% of their debts while on active duty
- Individuals that mainly have business debt (at least 50% of their total debts)
If you meet one of these conditions, you are exempt from the means test. This means you will not have to pass the means test requirement to file for Chapter 7 bankruptcy.
Schedule A Free Consultation to Find Out If You Pass the Means Test in Oklahoma
Determining Chapter 7 eligibility using the means test is not as straightforward as it seems. For this reason, let an experienced bankruptcy attorney in Oklahoma City review your finances and determine if you qualify. Contact the team at Mitchell & Hammond today to learn more about your options. To schedule a free consultation, call our law office at 405-216-0007 or submit your information via the form on this website.
