If you’re facing financial distress in 2020, you’re definitely not alone in your struggle. Finances generally fluctuate at various times in a person’s life. Perhaps, you’ve had years where you’re feeling financially stable and hopeful for the future, and other times where you’ve encountered challenges just trying to stay afloat. If you’re considering filing for Chapter 7 bankruptcy, you’ll want to learn more about means testing.
While you may be in need of immediate debt relief, whether or not you qualify for Chapter 7 bankruptcy depends on numerous factors. There is a standardized format for determining eligibility, which includes means testing. The more you learn about it ahead of time, the better-informed decisions you’ll be able to make as to which bankruptcy option is most viable in your particular case.
Here’s how it works
To take a means test, you would submit certain financial information, namely, your average income from the past six months. Officials will compare the amount with incomes from average households of similar size in your state of residence.
To qualify for Chapter 7 bankruptcy, your tested income amount must be equal to or less than the median (average) income for similar-sized households in your state. If yours is higher, it doesn’t necessarily mean you don’t qualify for any type of debt relief, only that you are ineligible for Chapter 7, specifically.
If you need to pursue another option
Perhaps, you have a reliable means of income and could keep making payments toward your debt if you were to restructure your payment plan. Many people refer to Chapter 13 bankruptcy as “the wage earner’s debt relief” because you must have disposable income to qualify.
This form of debt relief involves getting creditors to agree to allow you to adjust your payment plan. You continue paying off your debt rather than undergoing a complete liquidation of assets.
Advantages and disadvantages
While you may have several options for obtaining debt relief, there are typically advantages and disadvantages to each type of bankruptcy. What might be a best course of action in your case might not be relevant at all to someone else’s situation.
This is why it pays to discuss your options with someone who is well-versed in Virginia bankruptcy issues who can recommend an option that best fits your immediate needs as well as long-term financial goals.