Tampa Bankruptcy Lawyer Helping You Determine Eligibility
Individuals who wish to declare Chapter 7 bankruptcy, or liquidation bankruptcy, must pass the bankruptcy means test. Since this type of bankruptcy allows individuals to eliminate great portions of their unsecured debts, careful attention is given to the amount of income a petitioner has available. If the debtor’s income is deemed too high, that individual will not pass the test and will need to declare Chapter 13 bankruptcy instead.
As a skilled Tampa and St. Petersburg bankruptcy attorney, Dion Hancock can help you determine if you are eligible for Chapter 7 bankruptcy. We can analyze your finances and determine if your situation meets the means test requirements.
Calculating Your Income
Individuals who file for a liquidation bankruptcy must have a Current Monthly Income (CMI) that falls within the Chapter 7 bankruptcy requirements. This is a critical figure in the means test formula. The CMI is an average of income derived during the previous 6 months. It sounds simple enough, but in actuality it is a complicated formula that can make or break your chances of declaring Chapter 7 bankruptcy. The means test looks at income that was actually earned during the examined period. This is an important distinction that is often overlooked.
The CMI especially impacts individuals with irregular incomes, such as the types of wage earners noted in the following examples:
- A sales representative just received a commission from a sale that took a few years to complete. You may be able to argue that the income was derived over a three-year period, not just the past six months.
- You have a seasonal business, such as a Christmas tree lot. Your strict CMI would be much different in January than in August.
- An unexpected bonus can alter your CMI. You may be able to prove it was a one-time event and should not be included.
An experienced bankruptcy lawyer can provide you with the strategic insight into how your local bankruptcy courts interpret CMI. As a lawyer who has been in practice in Florida for more than 12 years, I am well-acquainted with the regional bankruptcy trustees and their assessments of CMI adjustments.
Comparison to the Florida Median Income
If your CMI is calculated to be less than the current median income of a same-sized household in your state, then you automatically pass the means test. If not, your household expenses and other allowable deductions will be subtracted to see if your remaining, or disposable, income is within acceptable parameters.
There are many deductions available that may help you qualify for Chapter 7 debt relief. These include, but are not limited to:
- Tax obligations
- Health, disability, or life insurance payments
- Child care expenses
- Mandatory retirement plan payments and union dues
- Mortgage and car loan payments
- Alimony and child support payments
- Regular charitable contributions
- Expenses for the care of a disabled child or elderly relative
- Special circumstances expenses
Dion R. Hancock, P.A. Will Complete Your Paperwork
At Dion R. Hancock, P.A., we complete all of your bankruptcy paperwork, including your means test documentation. This complex application requires a keen understanding of all requirements in order to ensure it is completed properly and is an accurate depiction of your current financial situation.
Mistakes on the means test may prevent your from securing Chapter 7 bankruptcy protection. Common mistakes include:
- Listing court-ordered child support amounts instead of what you actually receive or pay
- Taking non-allowable deductions or failing to take allowable ones
- Failure to take into account all financial dependents
- Including Social Security payments in your CMI calculation
Where There’s Means, There’s a Way
You may automatically assume you will fail the means test and are ineligible to file for Chapter 7 bankruptcy. However, this simply is not true. Once an accurate assessment of your CMI, expenses, and allowable deductions are calculated, you may be surprised to learn you fall well within the limits.
If you are considering petitioning for Chapter 7, call our office today! Together, we can determine what type of debt relief options you have available. Whether through a Chapter 7 bankruptcy, Chapter 13 bankruptcy, or bankruptcy alternatives, we can provide the skilled legal counsel and comprehensive representation you need and deserve.