Median Income and Means Test in Fair Oaks and Sacramento
Median Income and Means Test in Fair Oaks and Sacramento
As you may have heard, the 2005 changes to the bankruptcy law added a Means Test to the bankruptcy process. The concept behind this is that if you have the means or ability to pay, you should be in a chapter 13 rather than a chapter 7 bankruptcy. The means test was designed to reduce the number of chapter 7 bankruptcies and get more people to file for a chapter 13.
How does the means test work?
1) Median Income Test
Fist of all, they will look at your household income for the 6 months preceding the current month and calculate your median income from that. This median income will then be compared to the median income table.
If your average income is below the median income for your state, then you should qualify for chapter 7, since it is presumed that you don’t have the money to go through a chapter 13 bankruptcy. If you still opt for the chapter 13 bankruptcy, your low average income will benefit you, because you can do a 3 year as opposed to a 5 year chapter 13.
2) Means Test
If your average income is above median, you proceed to step 2, which is the means test.
Generally, if your income is more than $10,000 to $15,000 above the median income for your state, the means test and the court will conclude that you have enough money to fund a chapter 13.
The median income as defined by the table is not the average income, since that would include the extreme high and low ends, but tries to give a more accurate representation of the average.
As a Sacramento bankruptcy attorney serving the Fair Oaks community, I’m always glad to discuss your options and provide ready, brief, and clear answers for callers.
If you can pass the means test and would like to move forward with the Chapter 7 bankruptcy filing process, please contact our office at 916-313-9069 or email us at info@california-bankruptcyattorney.com for a free consultation. And, too, if you can’t pass the means test, we may be able to provide solutions of which you are unaware, or help with filing a Chapter 13 bankruptcy.
