Are you having difficulty paying all of your bills? Do you feel like you are in over your head when it comes to your debt? Are you worried about the bank repossessing your car or foreclosing on your home? If so, then you might be interested in filing for a Chapter 7 bankruptcy in Birmingham. One of the main benefits of a Chapter 7 bankruptcy is that the bankruptcy trustee will cancel are or most of your debts.

The trustee might also liquidate or sell some of your property to repay creditors. Chapter 7 bankruptcies are also referred to as “liquidation” and “straight” bankruptcies. Understanding the Chapter 7 bankruptcy process is important, and the first step in filing for a Chapter 7 bankruptcy is determining whether or not you meet the means test.

How Much Does Filing for Chapter 7 Bankruptcy Cost?

Filing for Chapter 7 bankruptcy usually takes around four to six months, depending on several different factors. The filing itself costs $355 in filing fees and administrative fees. Those filing for Chapter 7 bankruptcy must also complete credit counseling with an approved credit counseling agency. The credit counseling agency must be an approved credit counseling and Debtor Education program by the United States Trustee.

Our Birmingham Bankruptcy Attorneys can Help

Of course, the Chapter 7 bankruptcy process can become extremely complicated. Hiring a lawyer to handle your Chapter 7 bankruptcy can be tremendously helpful. At Bouloukos, Oglesby, & Mitchell Attorneys at Law, our  Birmingham bankruptcy attorneys have the skill and experience needed to help you through the bankruptcy process. We thoroughly understand the process of filing for bankruptcy in Alabama. Hiring our law firm to help you with your bankruptcy filing is tremendously valuable. Not only will your stress level decrease knowing that you have professionals in your corner, but you could also save money from our experienced legal advice.

The Chapter 7 Bankruptcy Means Test

In order to qualify for a Chapter 7 bankruptcy, you must first meet the means test. The means test looks at someone’s assets, income, and expenses. The first barrier to applying for a Chapter 7 bankruptcy is making sure that your income is not too high to qualify. The Chapter 7 bankruptcy test can seem quite confusing at first. Applicants will need to file the following forms to determine if they meet the means test:

  • Form 122A-1: Chapter 7 Statement of Your Current Monthly Income
  • Form 122A-2: Chapter 7 Means Test Calculator

Form 122A-1 will help you evaluate your monthly income as well as your marital status and your filing status. It will help you compare your monthly income to the state’s monthly income. If you are married and filing jointly for Chapter 7 bankruptcy, you and your spouse can file Form 122A-1 jointly in most cases. A skilled bankruptcy lawyer can help you determine if you need to file separately.

After stating your marital status and entering your bankruptcy case number, you will need to fill in information about your income level. Entering your income should be somewhat straight forward. To determine your average monthly income, you will need to add up all of your income for the last six months, from all income sources. Next, divide your income by six to and that amount will be your average monthly income. If you are an independent contractor, you own a business, or determining your income is complicated in another way, our skilled Birmingham bankruptcy lawyers can help you determine your accurate monthly income amount.

Providing an Accurate Statement of Income is Essential

It is easy to forget the irregular income you may have received in the last year. It can be wise to look at your bank statements to make sure you do not forget any income sources. Reporting accurate information about your income is essential. If the bankruptcy court determines later that you failed to report all of your income, you could face serious charges.

The more accurate your filing, the better. Take the time to comb through your bank statements so you can accurately report all of your income. As a general rule, any money that shows up as a deposit in your bank account will be considered income by the bankruptcy court. You will also need to fill out the following information:

  • Your gross wages before taxes and deductions, as seen on your paystubs
  • Any other types of income that you have received
  • Any income you receive or expect to receive from child support or spousal support
  • Income from any businesses you may own
  • Income from investments you own, including dividends
  • Any income from being unemployed
  • Retirement income
  • Any other type of income

Calculate Your Total Monthly Income to See if it Falls Below the Means Test

After you determine your monthly income, multiply it by 12 to determine your annual income. You will need to compare your annual income to the state’s annual median family income for your household size. You can use the U.S. Department of Justice’s website to compare your annual income to the annual median family income for your household size. As of the writing of this article, the median family income for one-earner is $47,680. When two people live in the household, the median family income is $55,905. For three people, the average median family income is $67,334 and for four people, the median is $81,514. The U.S. Department of Justice adds $9,000 for every additional person living in the household, in excess of four. Thus, if you are an Alabama family with three people living in your home, your income would need to be less than $67,334 to pass the first means test for  Chapter 7 bankruptcy.

Most Applicants, but Not All Need to Meet the Means Test

Some applicants who have certain types of debt may not need to meet the means test. When military service provisions apply to the applicant, they may be exempt from the means test. Additionally, when more than half of your debt is non consumer debt, often business debt, rather than consumer debt, you may be exempt from the bankruptcy means test.

Form 122A-2: The Actual Means Test

So, you have finished filling out Form 122A-1 and your income is higher than the median family income. In this case, you will need to file Form 122A-2, the true means test, to determine how much money you have that you can actually use to pay off your debts. When an applicant has too much available money, he or she may not qualify for Chapter 7 bankruptcy.

When you can show special circumstances that increase your expenses or reduce your available income, you may still qualify for Chapter 7 bankruptcy, even if you do not meet the actual means test. You will be able to use deductions similarly to how you would use deductions when calculating tax payments.

Contact Our Chapter 7 Bankruptcy Attorneys

The means test is essential to qualify for a Chapter 7 bankruptcy. As you can see, the forms used for determining means tests can be quite complicated. Working with an experienced bankruptcy attorney can help relieve stress. When you work with Bouloukos, Oglesby, & Mitchell Attorneys at Law, you will enjoy the benefit of our extensive knowledge and skill. Contact our Birmingham Chapter 7 bankruptcy lawyers today to schedule your initial consultation to learn how we can help you.