When filing for bankruptcy, you first have to figure out what type of bankruptcy you are going to file. And, in order to file under the most advantageous terms for yourself, you first have to know which types of bankruptcy filings you are eligible for.
This has become a bit complex since the passage of the new bankruptcy law five years ago. So, most times the process of determining whether you are eligible to file under the most advantageous plan is figuring out if you meet the means test for the state in which you are applying. If you fail this test, you will have to file under one of the more restrictive bankruptcy plan. If you do meet the test, however, you will be granted the opportunity to file under the more advantageous bankruptcy plan.
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But, the problem with this test are twofold. One is that each state has its own rules. Therefore, it is impossible to simple compute you current net income and determine if you meet the needs test. Because it will be different for each state. In some states it is a simple figure. In others, you have to take other income variables into account. In addition, the test is calculated based on a six months average. So, if your work is seasonal, and you are just coming off a period of time where you have earned more money than at other times of the year, you may not pass the means test. Whereas, if you were to wait another six months, you might easily pass the means test.
The second thing that affects your ability to meet the means test is the expenses that are allowed. These are also different among the states. For example, in some states certain business expenses are allowed to be deducted from your income while in other states those deductions will not be allowed.
The goal for most people is to be able to meet the means test so that they are eligible for a Chapter 7 bankruptcy, the type generally considered most favorable for consumers.
To determine if you meet the means test for your state, it is best to consult a bankruptcy lawyer that specializes in your area. However, if you can't afford a lawyer, some websites have the ability to calculate the means test for all states. It is worth noting, however, that not all of the results from the various calculators will match. So the most reliable source of information remains the bankruptcy attorney.
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