To leverage the benefits of Chapter 7 bankruptcy in South Dakota, understanding its procedures is key, particularly passing the “means test.” Demonstrating that your disposable income doesn’t allow for reasonable creditor payments is a critical step. For expert guidance through this intricate process, consulting our experienced South Dakota Chapter 7 Bankruptcy Lawyers is essential.
What is a Bankruptcy Means Test?
To determine eligibility for Chapter 7 bankruptcy, debtors must first pass the “means test.” This test evaluates your income, significant assets (like real estate and vehicles), household size, expenses, and consumer debts to assess if you meet the credited for Chapter 7 relief. If your income is less than South Dakota’s median income, you qualify for Chapter 7 bankruptcy. If your income is above a certain threshold after deducting expenses, you may fail the test. The means test calculates your disposable income by subtracting specific expenses from your monthly income. A higher disposable income makes it more difficult to qualify for Chapter 7.
It’s important to note that if you earn more than the state’s median, this doesn’t mean you can’t file for bankruptcy. You may have to consider filing for Chapter 13 bankruptcy instead or pursue another debt-relief option. Chapter 7 bankruptcy is intended for individuals with a genuine inability to pay their debts. The eligibility test for Chapter 7 aims to confirm this financial hardship.
What Can I Do If I Fail?
In the unfortunate event that you fail the Chapter 7 bankruptcy means test, Chapter 13 may still be an option. Chapter 13 entails a three to five-year repayment plan. During this period, you will make monthly payments to a designated trustee. This debt-relief option is beneficial if you want to keep certain assets such as your home, as it allows you to catch up on debts like a mortgage or repay debts that aren’t eligible for discharge in Chapter 7.
If you fail the income portion, there may be other ways to pass. If your financial circumstances drastically change since a previous Chapter 7 filing, it could lead to future eligibility. Additionally, if your income is initially too high, you might qualify by factoring in certain debts to decrease your disposable income. You should note that secured debts are weighed heavily in these calculations. Dedications for overdue taxes, medical expenses, and costs associated with disability care may help you meet the stringent income requirements.
Depending on the unique circumstances of your case, you might want to consider other debt solutions, such as debt consolidation or negotiating with creditors. If you are facing overwhelming debt and fail the means test, it’s in your best interest to consult with a qualified bankruptcy attorney who can help you understand the Chapter 13 process and determine if it’s the appropriate option for your situation.
As you can see, the means test can be complex. At 605 Bankruptcy, we are prepared to help safeguard your assets and reorganize your finances. Our legal team can guide you through your options, which may include Chapter 13 or exploring other debt relief strategies.
