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The Bankruptcy Means Test Explained

The Bankruptcy Means Tests is one of the most complicated aspects to bankruptcy law. This “test” was born of the 2005 changes to federal bankruptcy law implemented by congress in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). Effectively, individuals with primarily consumer debts have to prove that they are not abusing the bankruptcy laws.

To be certain, the means test makes qualifying for Chapter 7 bankruptcy more difficult; however, an experienced bankruptcy attorney can help you navigate the means test and qualify for the debt relief that you deserve.

The Bankruptcy Means Test Explained

The means test is a review of your income minus expenses. It determines whether or not you qualify for bankruptcy relief under Chapter 7.

If your net income falls below the state median for your household size, then you automatically qualify for Chapter 7 bankruptcy. Because there is no “presumption of abuse,” below-median debtors do not have to run the means test.

If your net income is above the state median for your household size, then you must run the means test to determine whether or not you qualify for Chapter 7 bankruptcy. An above-median debtor must overcome the presumption of abuse and demonstrate that the qualify for Chapter 7 bankruptcy. Understand that having a high income does not preclude you from relief under Chapter 7.

With the help of the experienced attorneys at The Law Offices of Barbara B. Braziel, even people who earn well above the median income for our state can qualify for Chapter 7 bankruptcy. Contact us for a free consultation and analysis of your income.

Median Income In Georgia

As of November 1, 2016, the median household income in Georgia is:

  • Household of One: $42,735
  • Household of Two: $55,600
  • Household of Three: $61,705
  • Household of Four: $72,290
  • Households of more than four: add $8,400 for each individual in excess of four.

If you live in Georgia and your gross household income falls below these figures, then you qualify for Chapter 7 bankruptcy relief without further means test analysis. If you live in Georgia and your gross household income is above these figures, then you must run the means test to determine if you qualify for Chapter 7 bankruptcy relief.

Calculating Median Income

The U.S. Bankruptcy Code defines how to calculate income for purposes of bankruptcy. It operates off of the presumption that your ability to pay back your debts in the future should be determined by your average income over the past 6-months. This calculation using a 6-month look back period does not account for your present circumstances, including recent decreases in your income.

Income for the purposes of the means test is calculated by taking your average income for the past 6-months. The calculation must include all income that you receive. However, the following benefits are excluded from the means test calculation of income: social security benefits, payments to victims of war crimes or crimes against humanity, and payments to victims of international terrorism or domestic terrorism.

Calculating the Means Test

The means test calculation considers your income minus allowable expenses. Essentially looking at your ability to fund a Chapter 13 re-payment plan.

The allowable expenses in the means test are calculated based on a mix of your actual expenses and standard pre-determined expenses. You can explore the official means test form here. An experienced bankruptcy attorney can help you navigate through the means test.

We are here to help you determine if you qualify for bankruptcy, and if so, what bankruptcy chapter will best serve your needs. We offer free consultations to anyone in Savannah, GA and all of the surrounding areas.

 

We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.

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The Power of the Automatic Stay and How It Helps You

As soon as you file for bankruptcy, all collection action against you must stop.

The automatic stay puts an end to collection phone calls, a mailbox stuffed with overdue bills, law suits, wage garnishments, and any other debt collection action against you. The automatic stay is powerful.

The automatic stay is a provision in the U.S. Bankruptcy Code that makes it illegal for creditors to attempt to collect on debts from a person who has filed for bankruptcy protection. There are only a few exceptions to the automatic stay.

 

The Automatic Stay Begins As Soon As Your Bankruptcy Case Is Filed

As soon as you file for bankruptcy your creditors must stop calling you, billing you, or taking any measures to attempt to collect money from you. Any repossession or foreclosure action must stop immediately as well.

 

The Automatic Stay Is Effective For the Life Of Your Bankruptcy Case

With few exceptions, the benefits of the automatic stay remain in effect throughout your bankruptcy case. At the conclusion of a successful bankruptcy, you receive a bankruptcy discharge. The bankruptcy discharge is a court order that says your debts are discharged. This means you are no longer personally liable to pay back your debts. Once you have your discharge, your creditors cannot legally attempt to collect any discharged debts from you, and the automatic stay is no longer necessary.

In rare cases the bankruptcy judge will lift the automatic stay at the explicit request of a creditor. In such cases, the creditor must file the appropriate paperwork and you must be given the opportunity to fight it.

 

Creditors Must Cease and Desist from All Collection Action

The automatic stay is a powerful right granted to debtors. Once you file for bankruptcy protection, your creditors are not allowed to:

  • Call you or send you bills
  • Garnish wages
  • Levy bank accounts
  • Sue you for unpaid debts
  • Move forward with a pending law suit
  • Repossess your car (at least not right away)
  • Foreclose on your home (at least not right away)

 

Exceptions to the Automatic Stay

There are a few rare exceptions to the automatic stay. These exceptions are enumerated by Congress in the U.S. Bankruptcy Code. The automatic stay exceptions include family law proceedings relating to divorce or parenting, collection on ERISA-qualified pension loans, IRS tax audits, demands for tax returns, or assessment of tax liabilities. However, the IRS must cease and desist from collection action for tax debts while the automatic stay is in effect.

 

The Automatic Stay Does Apply to Co-Debtors In Some Instances

The automatic stay may apply to other people who may have co-signed a loan with you.

If you have a loan or line of credit with someone else, the creditor is not allowed to continue collection action against an individual co-signer without court approval in most instances.

Note that if you file a joint bankruptcy petition with your spouse, the automatic stay will stop tax collection action against both of you. However, if only one spouse files for bankruptcy, collection action by the federal or state government for tax debt may legally continue against the non-filing spouse.

 

What Happens If A Creditor Violated the Automatic Stay

Any continued collection action against you is a violation of federal law. If you’ve filed for bankruptcy and a creditor continues to attempt collection, or even contacts you to attempt settlement, contact your bankruptcy attorney immediately.

Make sure to keep excellent records of the dates, times, names of people with whom you spoke, and any other evidentiary support. You may be able to make a recovery against a creditor who willfully continues to violate the automatic stay.

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We are here to stop creditor harassment, get you out of debt, and help you gain the financial freedom you deserve. Call us today at (912) 351-9000 or contact us via the web to schedule a free consultation.

The Law Offices of Barbara B. Braziel proudly serve people in Savannah, GA and the surrounding areas.

 

We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.

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