When other methods of debt relief haven’t helped you take control of your finances, Chapter 7 bankruptcy is one way to eliminate or restructure the funds you owe. But while this form of debt help can be life-changing, it isn’t something you can apply for overnight. In fact, before filing bankruptcy, you must first determine if you qualify by taking what’s known as the means test. While an attorney or financial professional will provide guidance tailored to your circumstances, the guide below breaks down the basics.

3 Ways You Can Pass the Means Test for Bankruptcy

1. Earn Below the Median Income

The first step to gauging your bankruptcy candidacy is to find out if you make more or less than the median income of your state. In Georgia, the latest available Census data shows median income is $56,183 per household. If your household makes less than this amount, you can already qualify if Chapter 7 bankruptcy fits your needs. If you earn more, you will need to provide further information on your disposable income.  

2. Determine Disposable Income

In the second part of the means test, all of your income sources are counted for the six months prior to filing bankruptcy and then divided by six. Next, you’ll deduct a variety of specific expenses from this amount—such as taxes, childcare, insurance premiums, healthcare, child support, and house payments.

After deductions, the resulting disposable income must be below a fluctuating amount—determined and reviewed by the U.S. Trustee’s Office—to pass the means test. If your disposable income is higher than the current limits, then you must qualify for an exception or file for Chapter 13 bankruptcy. Chapter 13 is when you restructure your debts to pay them off within a three- to five-year period.

3. Check for Exceptions

You don’t need to pass the means test if the majority of your debts are related to business expenses, also known as nonconsumer debts. You may also qualify for an exception if you’re a disabled veteran. To get this exception, the majority of your debts must have been incurred while you were serving. You must also have been discharged due to a disability or have a disability of 30% or higher. Other exceptions also apply to reservists and National Guardsmen. 

If you’re exploring the possibility of Chapter 7 bankruptcy, turn to the attorneys at Hurtt & Johnson, LLC. Specializing in debt relief for more than four decades, these Dalton, GA, bankruptcy attorneys will help determine what you qualify for, as well as streamline the filing process. Whatever your options, count on these professionals to provide valuable support every step of the way. For more details, visit this firm online or call (706) 226-5425.