Understanding The Means Test

What is the Means Test?

If you are hoping to file for Chapter 7 or Chapter 13 bankruptcy in California, it is important that you understand the basics of the means test. With the help of a trained bankruptcy attorney, you can successfully navigate this complex process and begin a fresh start today! If you are being burdened by excessive debt, this simple information can help you make the best decision for yourself and your family.

Under current state law, as in much of the U.S., you are required to meet the standards of the means tests in order to qualify to file for Chapter 7 debt relief. This regulation was put in place in order to ensure that potential applicants were not abusing the system and filing for liquidation rather than seeking a loan modification or filing for Chapter 13.

In order to qualify, there are several basic steps that you must undertake with the help of your bankruptcy lawyer. First, you will be required to submit to a income test. This is a relatively simple calculation, comparing your average yearly income to the median income for a family of your size in California. If your household makes less than the median income, you automatically qualify for Chapter 7 liquidation!

If you do not qualify under the first step, there is still a chance that you might be allowed to file. This second sep requires a complex calculation that takes a wide variety of factors into account, including your income and the worth of various assets. You will need the help of your attorney to guide you through this computation.

Chapter 7 or Chapter 13?

Once this is finished, you will know whether or not you will be allowed to file for Chapter 7 or Chapter 13. The basic difference between these two kinds of filings is actually fairly simple.

Under Chapter 7, your nonexempt assets are repossessed and sold, or "liquidated", in order to generate capital to pay off a portion of your debt. Ince this is finished, which usually takes several months at most, the remainder of your eligible debt is discharged and you are free to walk away!

Under Chapter 13, instead of a simple repossession, you will create a debt repayment plan, structured based on your income in order to allow you to repay a portion of your debt over three to five years. After this period is finished, your debt is considered repaid! Each kind of filing comes with certain benefits and drawbacks, and to determine which procedure you wish to seek, you will want the help of a trained legal professional.

A Bankruptcy Specialist You Can Trust

At the Law Offices of the Price Law Group, our legal team is dedicated to providing you with dedicated, compassionate service! If you are considering filing for bankruptcy, it is imperative that you seek help from one of the experienced attorneys at our firm. We have years of experience handling bankruptcy cases throughout the state of California and the west coast! Do not allow your debt to destroy your life. Please, visit our website and discuss your situation with our team in a free initial consultation. Begin the path to a fresh start as soon as possible.