Clark & Washington

Who Is Exempt From Taking the Bankruptcy Means Test?

Chapter 7 bankruptcy, which may also be called “liquidation,” allows you to discharge a large portion of your debt after liquidating and surrendering your non-exempt assets. However, this type of bankruptcy is not available to every debtor. In order to qualify for Chapter 7 bankruptcy, you must typically pass the bankruptcy means test. Fortunately, some debtors filing for bankruptcy may be exempt from this test.

What Is the Bankruptcy Means Test?

The bankruptcy means test determines who is eligible to file Chapter 7 bankruptcy based on their income, assets and expenses. If this test determines that you have enough resources to pay your debts, you won’t be permitted to file Chapter 7 bankruptcy, but you may still be able to file Chapter 13.

Means Test Exemptions

Several situations can prevent you from being required to take the means test before you file Chapter 7 bankruptcy. You may be exempt from taking the means test if:

You may also be exempt from taking the means test if you are a member of the National Guard or a military reservist who was called to active duty before filing bankruptcy.

Allowable Income Exclusions

If you must take the bankruptcy means test before filing Chapter 7 bankruptcy, you will need to provide information about your various sources of income, assets and allowable expenses. However, certain types of income can be excluded from these calculations. In the past, the law allowed debtors to exclude only those payments made under the Social Security Act, including:

However, since President Trump signed the Honoring American Veterans in Extreme Need Act of 2019 (HAVEN), veterans’ disability is now excluded from these calculations as well.

Hire a Bankruptcy Attorney

If you are planning to file bankruptcy, hiring an attorney is in your best interest. Bankruptcy law can be complicated, and it can be difficult to determine the best course of action for your needs. An experienced attorney can review your financial situation and help you decide how you should proceed. Your attorney will also be able to guide you through the process from start to finish. Please contact Clark and Washington today to learn more.

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