Filing for Chapter 7 bankruptcy is the lifeline many Wisconsin residents need to keep their heads above water. Wiping out debts and getting a fresh start can be a real lifesaver. However, there are rules that prevent people who have income over a certain level from filing for Chapter 7 bankruptcy. Although it sounds hard to believe, you can be too rich to go bankrupt even if you are drowning in debt.
Chapter 7 Means Test
Debtors who want to file under Chapter 7 must pass a means test before the court will allow their case to proceed. The means test is a government-designed set of factors that measures a filer’s income, expenses, and family size to determine whether it thinks the filer has enough disposable income to repay his or her debts.
There are two parts to the test.
The first part looks at a filer’s annual household income. If the filer’s household median income is lower than the average median income in Wisconsin for a household of the same size, the debtor passes the means test and may file for Chapter 7 bankruptcy.
All household income is used to calculate current monthly income. Even though your spouse may not be filing bankruptcy with you, you must include your spouse’s income when calculating the Means Test. The only income you are not required to include is income from Social Security retirement, SSI, or SSDI. If you are a Hanson & Payne client, this is not something you will have to figure out on your own. Our team will help you gather the information needed to calculate your average income, and pull the data on other Wisconsin families to compare it with.
If you do not automatically pass the means test on the first step, you move on to the second step. The second part of the means test involves taking a closer look at your disposable income. Your disposable income is the money left over each month after paying living expenses like housing, utilities, food, clothing, child care, and transportation expenses. If your disposable income is negative or very low, you may pass the means test and be able to file under Chapter 7.
Once again, if you are a Hanson & Payne client, our experienced team of bankruptcy attorneys will help you through the means-testing process. This is not something you need to figure out on your own.
What Happens If I Fail The Means Test?
If you fail the means test and are unable to file for bankruptcy under Chapter 7, you may still get some relief through the bankruptcy system. Chapter 13 of the bankruptcy code is a court-supervised repayment plan that is designed to help debtors who fail the means test reorganize their finances and make progress towards paying off their debts.
Experienced Milwaukee Bankruptcy Attorneys You Can Trust
If you are interested in filing for bankruptcy, the Hanson & Payne team is here for you. Our experienced bankruptcy attorneys help Milwaukee area residents who want to file for bankruptcy figure out if they are eligible to file under Chapter 7 and then move forward from there. We work hand in hand with our clients, so they do not have to figure out things like the means test on their own. Please contact us today to schedule an initial consultation.