Bankruptcy Lawyer Bryan W. Stone answers the question: “What is the means test?”
Filing for bankruptcy is a difficult decision to make. However, you may not be eligible to file for bankruptcy at all in North Carolina if you do not pass the means test. Under the means test, if your monthly income is less than the median income in North Carolina, you are eligible to file for Chapter 7 bankruptcy.
The purpose of the means test is to prevent people from filing for bankruptcy when they can actually afford to pay back some or all of their debts. In North Carolina, you can pass the means test in two steps:
- The first step. Your household income is calculated and compared with the median income for households of your family size in North Carolina. If your monthly income (the figure is determined based on an average from the last half a year) is less than the median income in North Carolina, then you pass the means test and can file for Chapter 7 bankruptcy. If it is higher, proceed to step number two.
- The second step. Even if you failed the means test because your monthly income is higher than the median income in North Carolina, you might still qualify by conducting an extended analysis of your income and expenses. It is advised to consult with a Charlotte Chapter 7 bankruptcy attorney to determine whether you qualify during this step.
The extended analysis is based upon the deduction of certain expenses from your monthly income. If you have little or no disposable income after that calculation, you may qualify for a Chapter 7 bankruptcy in North Carolina.
What to Do if You Failed the Means Test
Even if you failed the extended means test analysis, there might still be a chance to qualify for bankruptcy. If you attempted to conduct the analysis on your own, it is vital to contact a skilled bankruptcy attorney in North Carolina to take a second look.
After all, it is easy to forget about certain monthly expenses that could be deducted from your monthly income. An experienced attorney will determine which expenses are deductible and which ones are not to help you qualify under the bankruptcy means test.
Do not forget about allowable expenses, such as taking care of an elderly or disabled family member. Also, many debtors fail to consider their expenses in the foreseeable future when conducting the extended analysis. If you have an aging family member who will need to be taken care of in the nearest future or you are expecting a baby, these factors should be taken into account when calculating your deductible expenses.
If your income is unstable or not regular (i.e., you are a seasonal worker), this factor might impact your eligibility for a bankruptcy filing in North Carolina. There are a multitude of other factors that need to be considered to determine whether you qualify under the means test. If you failed the means test, do not give up. Instead, contact our Charlotte bankruptcy attorney at Arnold & Smith, PLLC, to take a second look. Schedule a consultation with our attorneys to determine your best option and help you navigate the legal process. Get a phone or video consultation by calling at (704) 370-2828 to speak with our detail-oriented and well-versed lawyers, or fill out our contact form. Now taking cases throughout North Carolina with offices in Uptown Charlotte, Mooresville and Monroe.
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