If you are drowning in debt like so many Wisconsin residents are, you have probably been looking at all of your available options for relief. Unfortunately, because of your search, you may feel more confused now than ever before about whether bankruptcy — particularly Chapter 7 — is a good fit for you. If you want to know if you qualify for Chapter 7 relief, the means test will let you know.
Some people hear the word test and the anxiety associated with school exams comes rushing to mind. This is not that kind of test. You cannot get anything wrong on the means test. The purpose of it is to compare your income level to the state median in order to see if you fall below the middle level. If you do, you pass and may file a Chapter 7 petition. If you do not, all hope is not lost as Chapter 7 bankruptcy protection may still be available to you.
Items needed to take the means test
When taking the means test, it is important to have accurate information. This is not something you can guess. So, gather the following items before you get started:
- Six months’ worth of paystubs
- Six months’ worth of all other income statements
- State median income according to most recent census data
Wondering what is up with the six-month requirement? Changes in financial circumstances during that time frame will be taken into consideration when determining if you qualify for Chapter 7 relief. Reports suggest that only 12% of those who take the means test do not pass it — initially.
If you fail, dig deeper
The few who fail the means test can dig into their finances a little deeper in order to determine if Chapter 7 bankruptcy is still an option. You see, it is not all about your income level. Your disposable income also plays a role in determining eligibility. Disposable income is the amount of money you have left at the end of the month after paying all for all essential items, such as:
- Food costs
- Transportation expenses
- Clothing costs
If you have little or no disposable income, even if your income level is over the state median level, you may file a Chapter 7 petition.
What if you fail even after looking at your disposable income?
There are other bankruptcy and debt relief options that may better suit your situation. Legal counsel can walk you through those options and help you choose the one that will work best given your circumstances.