9 Mistakes to Watch Out For on the Bankruptcy Means Test
The bankruptcy means test is a crucial element in filing for bankruptcy. It helps determine whether a person is qualified to file for Chapter 7 bankruptcy or whether they have to repay some of their debts through Chapter 13 bankruptcy.
However, many people make mistakes when filling out the means test, leading to incorrect results, causing them to either miss out on bankruptcy relief or end up in debt repayment plans they cannot afford.
In this blog post, we’ll discuss the common mistakes to watch out for on the bankruptcy means test.
1. Incorrect Calculation of Income
One of the most typical errors people make when filling out the bankruptcy means test is incorrectly calculating their income. The means test requires the filer to calculate their average monthly income for the six months before filing for bankruptcy. This calculation includes all sources of income, including wages, bonuses, tips, and self-employment income. A mistake while calculating this income can lead to an incorrect determination of eligibility for Chapter 7 bankruptcy.
2. Overvaluing Expenses
Another mistake people make on the bankruptcy means test is overvaluing their expenses. The means test allows filers to deduct certain expenses from their income, such as housing, transportation, and health care costs. However, these deductions are limited to the actual amounts spent on these expenses, not what the filer thinks they have spent.
3. Failing to Include All Income
Another common mistake on the bankruptcy means test is failing to include all income. The means test requires the filer to disclose all sources of income, including income from side jobs, rental properties, and investments. Failure to disclose all income to your bankruptcy attorney can lead to disqualification from Chapter 7 bankruptcy.
4. Failing to List All Debts
The means test also requires the filer to list all their debts, including secured, unsecured, and priority. Failing to list all debts can lead to an inaccurate calculation of disposable income, affecting eligibility for Chapter 7 bankruptcy.
5. Incorrect Calculation of Disposable Income
Disposable income is the income that is used to repay debts after deducting allowable expenses. The means test requires the filer to calculate their disposable income, which is used to determine eligibility for Chapter 7 bankruptcy. Mistakes in calculating disposable income can lead to incorrect eligibility determinations.
6. Incorrect Use of State Median Income
The means test uses the state median income to determine eligibility for Chapter 7 bankruptcy. However, some people make the mistake of using the wrong state median income, leading to incorrect eligibility determinations.
7. Failing to Include Non-Filing Spouse’s Income
If the filer is married, the means test requires the spouse’s income to be included in the calculation of disposable income. Some people make the mistake of failing to include their spouse’s income, leading to inaccurate eligibility determinations.
8. Failing to Seek Professional Help
Bankruptcy means tests can be complicated, and mistakes can be costly. It is important to seek professional help from a bankruptcy attorney to avoid errors on the means test, which can affect eligibility for bankruptcy relief.
9. Failing to Consider Alternatives
Finally, some people make the error of assuming that bankruptcy is their only option. There may be alternatives to bankruptcy that can help with debt relief, such as debt consolidation or negotiation. Failing to consider these alternatives can lead to unnecessary bankruptcy filings.
Hire a Bankruptcy Attorney Now
The bankruptcy means test is a crucial step in bankruptcy. Avoiding these common mistakes can help ensure accurate eligibility determinations and help filers get the relief they need. Seeking professional help from a qualified bankruptcy attorney can also help avoid mistakes and ensure a successful bankruptcy proceeding.
Angela R. Owens is an experienced debt defense lawyer who serves clients in Plano, Allen, Frisco, Dallas, and the surrounding areas. With her extensive knowledge and skills in debt defense, she has successfully helped numerous clients overcome their debt-related issues and achieve a fresh financial start. If you need debt and legal assistance, contact our team today to schedule a consultation with a bankruptcy attorney and start your journey toward financial freedom.