Being in a situation where you are considering filing for bankruptcy can be stressful and overwhelming. If you are in Florida and thinking about filing, you may be wondering what is involved in the Florida bankruptcy means test.
The means test is a crucial element in determining whether an individual qualifies for Chapter 7 bankruptcy. Therefore, it is essential to understand what it entails and how it might affect your petition.
What’s the mean test and what do you need to know about it if you’re considering bankruptcy?
What is the Florida Bankruptcy Means Test?
The Florida bankruptcy means test is a calculation that measures an individual’s income against the median income level of the state. It is used in Chapter 7 bankruptcy cases and assists in determining if an individual is eligible to file.
Lawmakers introduced the means test as part of the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act in response to the concern about the increased incidence of bankruptcy fraud. The purpose was to limit Chapter 7 bankruptcy to those who cannot afford to pay their debts back under Chapter 13 bankruptcy.
How is the Means Test Calculated?
The means test is calculated by first filing out a comprehensive form that calculates your household income, allowed expenses, and disposable income. Then, the test determines whether your disposable income is above or below the state’s median income level.
If it is below the median, you will be eligible for Chapter 7 bankruptcy. However, if your disposable income is higher than the median, then you will need to determine whether you can afford to file for Chapter 13 bankruptcy.
What Happens If I Fail the Means Test?
If you fail the means test, you may not be eligible to file for Chapter 7 bankruptcy. However, that does not mean that you cannot file for bankruptcy at all.
You may still be eligible to file for Chapter 13 bankruptcy, which does not have the same income requirements as Chapter 7. Chapter 13 allows for a repayment plan that can be up to five years. It’s ideal for people with a stable income because they can afford to repay their debts over time.
Are There Any Exceptions to the Means Test?
Yes, some exceptions exist to the means test.
For example, disabled veterans who incurred most of their debt while actively serving in the military can be exempt from the means test. Also, if you are in debt primarily from operating a business, you may be exempt.
For more information on these exemptions, speak to a bankruptcy attorney.
The Florida bankruptcy means test is a crucial element in determining whether an individual qualifies for Chapter 7 bankruptcy. It allows you to better prepare yourself for the bankruptcy process.