Montgomery, AL Attorneys Represent Debtors in Bankruptcy

Alabama Law Firm Offers Guidance Regarding Means Tests

Alabama residents who are considering bankruptcy will need to pass a means test in order to determine whether they will be eligible to file for chapter 7 bankruptcy (straight bankruptcy), or chapter 13 (reorganization).

The Bankruptcy Means Test

The bankruptcy means test will determine whether your income is low enough for you to file chapter 7 bankruptcy. The formula is designed to keep those with higher incomes from filing for chapter 7 bankruptcy and wiping out the majority of their debt, and instead requires them to file for chapter 13 bankruptcy and part of what they owe.

However, you don’t have to be penniless to be eligible to file for chapter 7 bankruptcy. It is possible to earn substantial monthly income and still qualify for Chapter 7 bankruptcy if you have high expenses, such as an expensive monthly mortgage or vehicle payments.

The means test uses household size to determine your monthly disposable income by deducting specific monthly expenses from your average income over the six calendar months before the bankruptcy filing. If it is determined that you are unable to pay a minimum specific amount per month to your unsecured creditors after your expenses, you may be able to qualify for chapter 7 bankruptcy.

Household size can sometimes be difficult to determine – some courts will count everyone in the house while others will only count those who are financially dependent on the bankruptcy filer.

Contact an Experienced Montgomery, AL Bankruptcy Law Firm

Are you looking for legal guidance regarding the bankruptcy means test? Contact the Alabama bankruptcy lawyers with the Bond & Botes Law Offices online or call 1-877-581-3396 to schedule your initial consultation with an experienced bankruptcy lawyer today.