There is more to bankruptcy than simply realizing unmanageable debt and contacting an attorney. Once you have an attorney, you must be able to choose which type of bankruptcy you want to file. One of the easiest ways to help this situation along is to take the bankruptcy means test; it is a test that uses information you supply to decide whether or not your income is low enough to file a Chapter 7. This is not the only use; you can, after all, choose to file a 13 even if you qualify for a 7, in which case your means test will help determine your monthly payment.
MONTHLY INCOME
The first step is to find out whether or not your monthly income is more or less than the median income. According to the US Department of Justice, the median household income for an individual in the state of Utah is $48,176; $55,555 for a couple; $59,626 for a family of three; and $64,780 for a family of four. As this is subject to change and your family may be larger than four members, you may want to check this for yourself before you run your numbers. If your monthly income is lower than the median income, you do not need to continue with the means test; you may file a 7 if you wish. Otherwise, you must continue with the test or choose to file a 13 instead.
Higher Than Average Income
Even if your monthly income is higher than the median income, there is still a small chance that you can qualify for a Chapter 7 bankruptcy. Your next step, should you choose to continue, uses simple math to determine whether or not you make enough per month to realistically pay off at least part of your debt. First, add up all of your relevant monthly expenses. In some cases, you can use the amount you currently spend; in others, such as housing and transportation costs, you must use a predetermined amount of money. Once you subtract these expenses from your monthly wages, the number left over is called your disposable income.
Finish the Means Test
Once you have your disposable income, multiply it by sixty. If the result is under $7,025, then you have passed the test. Don’t worry, though; you still have a chance! If your disposable income is over $7,025 but under $11,725, you can continue with the test. Add up your non-priority unsecured debt and multiply it by twenty-five percent. If this number is larger than your disposable income, you qualify for a 7. This does not mean you must file a 7; it just means that you may, if you wish to do so. Talk to your attorney about whether or not a Chapter 7 bankruptcy is right for you; after all, even if you pass your means test, you and any existing family members may benefit more from filing a Chapter 13 bankruptcy than you would from filing a 7!
