There are many restrictions in successfully filing bankruptcy. One such restriction is the amount of money that you make while still being able to file bankruptcy. Although most clients hope that their Stockton bankruptcy attorney can give them a simple answer, this is most often not the case. It is not as simple as giving a simple number such as $5,000 per month.
In order to successfully file Chapter 7 bankruptcy, you need to take and pass two income and expense tests:
- The Current Income and Expense Test (also referred to as Schedules I and II)
- The Means Test
The Current Income and Expense Test
As part of test number one, you need to submit Schedules I and II forms to the court. These forms list out your current income and expenses and the income and expenses you foresee in the future. You will not take into account the expenses you won’t have after the bankruptcy filing, such as credit car payments.
If the forms reveal that a bankruptcy filing will leave you with excess money after paying your bills, the bankruptcy court will not allow you to file Chapter 7. The court will determine that a bankruptcy filing would be an abuse of the system. The reasoning is that if you have money left over, you should file Chapter 13 so you can use the extra money to pay creditors.
In most cases, an experienced Stockton bankruptcy attorney should be able to work with his BK clients to show a budget deficit after filing Chapter 7 bankruptcy.
The Means Test
In 2005, Congress added an additional test to prevent frivolous bankruptcy filings. You will now need to pass The Means Test too if you want to file for Chapter 7. This is a two-part test.
In the first step, the court will compare your income to the median income for a similarly-sized family in California. If you make less than the median, you pass and don’t have to go to step 2. If your income is more, you go to step 2.
In the second step, you will go through a complicated calculation, similar to filing a tax return. This is precisely why it is important to hire an experienced Stockton bankruptcy attorney. Your attorney can help make sure you pass this test and successfully file Chapter 7 bankruptcy.
Call an Experienced Stockton Bankruptcy Attorney
If you have already filed for bankruptcy or are planning to file for bankruptcy, it is important to immediately seek legal help. It may be in your best interest to consult with an experienced bankruptcy attorney to help you determine what the plan that best suits your specific needs.
For more information or to schedule a complimentary consultation with Stockton bankruptcy attorney Gurjit Srai, please call (209) 323-5558 or (559) 314-2796, or complete our online form.