Understanding the Means Test for Memphis Bankruptcies
Significant debt can be a stressful endeavor, and in many cases, debtors are just looking for a fresh start. Although nobody wants to go through bankruptcy, Chapter 7 bankruptcy can provide debtors with that fresh start, as it wipes out debt through the liquidation of assets.
After serving the Memphis area for more than 20 years, Memphis bankruptcy attorney John E. Dunlap, P.C. understands that bankruptcy may be the only option, but by effectively filing for Chapter 7 bankruptcy, you can give yourself that fresh start, get your debts paid, and move on with your life.
If you’re planning on filing for Chapter 7 bankruptcy, you must pass the Means Test first. Below, you can find all the information you would need to understand and take the Means Tests for Memphis bankruptcies. In the meantime, when planning for Chapter 7 bankruptcy, it is essential to have a Memphis bankruptcy attorney at your side. From strategic counseling to diligently representing your interests in Bankruptcy Court, Attorney John E. Dunlap can guide you through this process.
We offer free 30 minute strategy sessions to get started and find out more about your options for filing bankruptcy and if Chapter 7 is right for you.
Who Is the Means Test For?
Chapter 7 bankruptcy is essentially a liquidation of your assets, where a trustee collects then sells any non-exempt assets, paying you (the debtor) any amount exempted. The proceeds from the liquidation are then distributed among your creditors, and a commission is paid to the trustee who oversaw the distribution. After Chapter 7 is over, most people are debt-free. To file for Chapter 7, however, you must first pass the Means Test.
The Means Test generally only applies to high-income households, and if your household is below the median income for Tennessee homes, you are effectively exempt from the test. If your income is higher than the median, the Means Test determines if you’re able to pay back some of your unsecured assets through a Chapter 13 bankruptcy. Therefore, this test limits the use of Chapter 7 for people who truly cannot pay their debts through normal channels.
Taking the Means Test is the first step when it comes to preparing to file a Chapter 7 and preparing the documents needed to file Chapter 7.
Median Income for Tennessee Homes
The Means Tests is essentially a calculation of your monthly household income after expenses to see if you can file for Chapter 7 or Chapter 13 bankruptcy. To determine this income, the Bankruptcy Court averages your monthly income for the last six months after expenses. After determining this average, it is multiplied by 12 to determine the average annual income.
Income is considered by the State of Tennessee as business income, rental income, interest and dividends, pensions, retirement plans, and even unemployment income. Calculating your expenses is dependent on national, Tennessee, and local expenditure standards, all of which come from the Census Bureau and the IRS.
- 1 Person Household: $45,842
- 2 Person Household: $55,759
- 3 Person Household: $63,865
- 4 Person Household: $75,172
- 5 Person Household: $83,572
- 6 Person Household: $91,972
- 7 Person Household: $100,372
- 8 Person Household: $108,772
- 9 Person Household: $117,172
- 10 Person Household: $125,572
Am I eligible for Chapter 7 bankruptcy?
Determining if you’re eligible for Chapter 7 isn’t just as straightforward as looking at your pay stubs. Instead, it considers your overall financial health, not just want you earn.
Consulting with an experienced bankruptcy attorney can help you determine if you’re eligible for a Chapter 7 bankruptcy. We offer free 30 minute strategy sessions to discuss your finances and help you determine if Chapter 7 may be right for you.
If you’re household income is above the median, but you’ve recently experienced a loss of income, it could help to wait a couple months before filing. Because of the way bankruptcy courts determine income averages, this can be as long as six months since the loss or less. Working with an attorney can help you determine when the right time to file is.
What happens if I pass the Chapter 7 Means test?
Once you pass the means test, you have the option to file for Chapter 7. The next step is to determine if that’s the right option for you, taking into account your assets and what you’d like your life to look like after filing bankruptcy.
The entire process can be incredibly complex, but at the Law Firm of John E. Dunlap, our expertise helping hundreds of Memphis residents allows us to effectively and efficiently get you through this process. Although we cannot make any guarantees, our record of successes in bankruptcy cases makes us confident that we’ll be able to help you too.
For a free strategy session, contact us today!