Determining which type of bankruptcy will work best for your circumstances can be challenging. One of the best ways to decide whether or not you pass the means test and qualify for a Chapter 7 Bankruptcy is to speak to an experienced Los Angeles bankruptcy lawyer.
The means test allows applicants to determine whether their income exceeds the limit for filing for a Chapter 7 bankruptcy. You will need to file two different forms to decide whether or not you passed the bankruptcy means test. You may be exempt from having to pass the means test. In that case, you will need to file a Statement of Exemption.
Calculating Your Total Annual Income
An essential part of the means test for Chapter 7 bankruptcy is calculating your total annual income. You will need to add up all of the gross income you have received for the last six months from every source. Your gross income will be listed on your pay stubs as the amount you made before paying taxes and deductions. You will also need to add in any other types of income you received, such as:
- Spousal support or child support
- Income from businesses you own
- Income from work you have done as an independent contractor
- Income from investments you own, such as stock dividends
- Retirement income
- Any other income you may receive
You may need to look through your bank statements to record all the income you receive, so you do not forget about any of it. Then you can divide each source’s six-month total by six to arrive at your average monthly income from that source. You will need to multiply your monthly income by 12 to arrive at your annual income. Next, you will need to compare your income to the state’s annual median family income for your household size. As of right now, the median household income for California is as follows:
- 1 Member Household – $47,798.00
- 2 Member Household – $62,009.00
- 3 Member Household – $66,618.00
- 4 Member Household – $75,111.00
- 5 Member Household – $83,211.00
- 6 Member Household – $91,311.00
If your income is higher than the California median income for your household size, you will need to complete the means test by calculating your income and expenses. After you subtract your allowed expenses from your income, you can determine whether you qualify for a Chapter 7 bankruptcy.
Contact our Bankruptcy Lawyers in San Diego Today
Chapter 7 bankruptcy is appealing to many people because, in the end, most of their debt will be wiped out. However, there is a means test that applicants must pass before they can file for Chapter 7 bankruptcy. At the Bankruptcy Law Center, We will carefully review your situation and your goals to help you decide whether to file for Chapter 7 or Chapter 13 bankruptcy. Contact us today to schedule your initial consultation.