If you wish to apply for Chapter 13 bankruptcy, you will need to submit Form B22 that is designed to discover how much disposable income you have. Based on your Form B22, a budget will be drawn up. In this budget, your expenses are grouped under different categories, and each category is given a dollar amount. Unfortunately, the dollar amount assigned to each category is often very minimal. And any amount that you spend above this dollar amount for that category of expense is considered disposable income. Disposable income is what will be used to repay your creditors.
Let’s say the dollar amount for your housing loan is $900. This means any amount above $900 is considered disposable income regardless of how much you are actually paying for your housing loan. Suppose you actually pay $1,800 for your housing loan every month. This means the extra $900 is available for repaying your creditors even though you have been using it to pay towards your housing loan all along.
This is why you should consult a bankruptcy attorney before you take a Means Test. If you are considering filing for bankruptcy, call us at (813) 200 4133 for a free consultation. We will advise you on how to shift your expenses around (if necessary) to make it as close as possible to the dollar amount set by the IRS.
If you intend to file for Chapter 7 bankruptcy, you may need to take a Means Test if your monthly income is below a certain level set by your state. This minimum level of income is dependent upon the number of members in your household. If your income exceeds the minimum income, you have to take the Means Test. Here the means test is not to determine disposable income but to determine eligibility to file for Chapter 7.
In particular, the means test in Chapter 7 bankruptcy examines your average income over the last 6 months preceding your bankruptcy filing. If this average income exceeds the minimum income set by your state, then you are not eligible for Chapter 7 bankruptcy and your petition will be dismissed.
Again this is the reason you should consult your bankruptcy lawyer before taking the Means Test and filing for Chapter 7 bankruptcy. Call us at (813) 200 4133 for a free consultation. We will tell you what to do if your average monthly income exceeds the minimum set by your state and you are likely to fail the Means Test.