If you’re planning to file for Chapter 7 bankruptcy in Arkansas, or in any other state for that matter, you first have to pass the means test. But what exactly is this means test and who should take it?
The Bankruptcy Means Test
Not everyone filing for a Chapter 7 is required to take the means test. It only applies to those who have high incomes, meaning that if your income is less than the state’s median income for the size of your household, you will be exempted from taking the test and could directly file a Chapter 7.
On the other hand, if your income is higher than the state’s median income, you must take the test to accurately determine if you are capable of repaying some of your debts via Chapter 13.
The following are the median income thresholds in the state:
- $39,155 for one individual
- $47,780 for a household of two
- $52,613 for a household of three
- $59,092 for a household of four
- $67,192 for a household of five
The test will involve the calculation of income and expenses. You will need to gather pertinent information regarding your monthly income, which includes majority of your income sources such as rental income, business income, dividends and interests, retirement plans, pensions, unemployment income, as well as your monthly expenses.
Other Things to Note
If you have debts that are not considered consumer debts, you might be exempted from the test. To avoid lifelong regrets, it’s always best to get some professional help. Don’t hesitate to contact experienced law firms like The Baim Law Firm.
You might likewise be exempted from taking the test if you’re a disabled veteran and accumulated your debts mainly while on active duty or during a homeland defense-related task.
In addition, take note that just because you’re eligible for a Chapter 7 doesn’t necessarily mean that you should file a Chapter 7. In general, Chapter 7 is ideal for individuals who don’t need to retain secured property such as a house on mortgage. That said, the best way to determine which bankruptcy option will most beneficial to your case is to consult a lawyer.