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Let me say this first: The “Means Test” is a “Paper Tiger” for most people. It’s scary when you first see it but an experienced Chapter 7 bankruptcy lawyer can show you that it is mostly toothless. That being said, read on….
The “Means Test” determines whether you will be eligible to file a Chapter 7 Bankruptcy Case. The Means Test can be somewhat complicated, but the basic idea is that if you: 1.) earn a lot of income; and 2.) have the ability to re-pay a significant portion of your debts, you should not be eligible to file a Chapter 7 Case, but instead should have to file a Chapter 13 Case in which you repay all or a portion of your debts. Most people who are considering bankruptcy will easily pass the Means Test because they either do not earn a lot of income or because they cannot afford to pay much to their creditors due to their particular expenses.
The Means Test requires you to total your gross income (and your spouse’s, if they are part of the same household) received from all sources (excluding social security benefits, and various other types of income) during the six (6) calendar months before the month you file your bankruptcy case. You divide that figure by six (6), which gives you an Average Monthly Income figure for the 6-month period. You multiply that figure by twelve (12), which is your Annualized Gross Income.
If your Annualized Gross Income is less than the median income for the state which you live in, you automatically pass the Means Test.
The median income level is related to your household size. In Alabama, the median income levels are as follows:
Household Size Median Income
So, for example, if you are a family of five (5), and your annualized income figure is $67,000, then you automatically qualify under the Means Test for a Chapter 7 Bankruptcy, no questions asked.
If your annualized income figure is higher than $69,093, you may still be eligible to file a Chapter 7 Case, but you have to itemize your expenses to demonstrate why you are unable to re-pay your debts. Expenses such as food, clothing, rent/mortgage payments, vehicle operation and ownership expenses, taxes, insurance, and a large number of other expenses are typically allowed as necessary expenses under the Means Test. Consequently, unless your gross income SIGNIFICANTLY exceeds the median income level, you will more than likely qualify for Chapter 7.
In Alabama, wage or paychecks garnishments take 25% of your pre-tax income and give it to your creditors! They can also get into your personal bank account and take whatever is there. Alabama has laws to protect you from garnishment. Creditors hope you won’t find out about these laws.
At the law firm of Brent W. Davis & Associates, LLC, we are experienced in ending wage garnishments quickly. Come by for a free consultation and let us show you how we can help.