Qualifying through the Georgia Chapter 7 Means Test
Generally, there is one roadblock that stands between debtors and their Chapter 7 discharge: qualifying through the Georgia Chapter 7 Means Test. The most common chapter of bankruptcy filed by debtors is Chapter 7.
Chapter 7, outside of certain specific situations, is the more desirable of two types of personal bankruptcy. It is more desirable than the other chapter, Chapter 13, for numerous reasons. First, it is significantly cheaper. Chapter 13 normally requires a monthly payment plan that extends three to five years. The fees for Chapter 13 are much higher than those for Chapter 7.
The timeline in a Chapter 7 is significantly quicker, as a standard Chapter 7 closes after three to four months. Chapter 7 rarely stays open longer than a year or two, and that is only in situations where the trustee has collected money. As a result, most potential filers of bankruptcy are seeking to file a Chapter 7.
Passing the Georgia Chapter 7 Means Test
The Means Test determines whether debtors can qualify for Chapter 7 bankruptcy or instead have to file Chapter 13. The intention of the Means Test is to limit the number of applicable filers of Chapter 7 bankruptcy. Bankruptcy laws changed significantly in 2005. The Means Test limits debtors’ chances of qualifying for Chapter 7 unless their income is low or their expenses are high.
The first way you can qualify for Chapter 7 is by qualifying based on your income being low. Every state has a median income for various household sizes. If your income equals or is less than the median, you automatically qualify for Chapter 7. However, having an income higher than the median requires you to take the Georgia Chapter 7 Means Test.
The Means Test can be challenging, and it would be a smart decision to retain an experienced bankruptcy attorney. In order to pass the Means Test, you must not have a legally-significant amount of disposable income left over every month after paying your necessary, or allowed, monthly expenses. Disposable income over a certain amount will automatically put you in a Chapter 13, thereby allowing creditors to partially collect.
The necessary expenses allowed on the Means Test are put into different categories. Some costs that cannot go towards these necessary expenses include: current monthly credit card obligations, personal loans, most retirement contributions unless mandatory, and similar discretionary expenses.
Once you list all income and expenses, the Means Test determines whether you qualify for a Chapter 7. If you were to file a Chapter 7 with a failed means test, you would have to prove that your case fits a certain exception. These are rare situations and an experienced attorney has the ability to tell you if your situation fits a possible exception.
Outside of those rare exceptions, there are a few ways to bypass the Means Test. If your debts are primarily of the non-consumer kind, then you would automatically qualify for a Chapter 7. There are certain exemptions for military veterans and injured/disabled people as well.
Chapter 7’s Means Test can be intimidating, but it is an important part of the bankruptcy process.