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Filing for bankruptcy may be one of the most stressful times in your life. But taking the means test can be even more stressful on you than the actual filing, especially if you don't know how to complete the income portion of the test properly. You can easily fail the means test if you submit the wrong type of income, or if you submit the right income under the wrong category. If you need help with the means test, contact a bankruptcy attorney in your area. The attorney can explain how the means test works, as well as show you how to report the right income on the test when you retake it. This article will give you some information and tips to get you started.
How Can You Fail the Means Test When Your Income is Very Low?
Having a very low income and failing the means test can frustrate and confuse you — especially when you think you did everything correctly. However, many consumers find the means test too difficult and time-consuming to do on their own. They simply don't understand how the test works.
The means test is used to see if you're eligible for Chapter 7 instead of Chapter 13. To determine if you are eligible for Chapter 7, the means test performs a detailed calculation of your income and expenses to see which is higher. The test bases its calculations on the average income earned by each household in your state, instead of nationally.
If your income is much lower than your expenses, you pass the test right away and can file for Chapter 7 bankruptcy. When your income is higher than your expenses, the test automatically fails you. But don't give up if this happens to you. You most likely submitted your income incorrectly.
What Kinds of Income Should You Report on the Means Test and Why?
In order to obtain a passing test result, your bankruptcy attorney completes your means test from scratch. To get started on a new means test, the attorney needs copies of all the income you earned during the past six months, which includes the wages you received from any permanent and/or temporary jobs you held during this time. If you don't have paycheck stubs because you received the wages by direct deposit, print off and submit copies of your bank statements to the lawyer.
You also need to submit any child support funds you receive for your kids to the attorney. Although child support isn't earned income, it does count towards your total income for the six-month period.
If your state transfers your child support funds to your bank account or to a debit card each month, you'll need to request financial statements from the state yourself, or sign an affidavit and give your attorney permission to obtain the statements for you.
Once the attorney obtains records of the income mentioned above, he or she adds it to a new means test. The attorney can now examine the the other types of income you added to your previous means test, which is probably why you received the negative test results in the first place. The unneeded income includes Social Security benefits and temporary cash assistance from the state.
Why Shouldn't You Submit Your Disability or Temporary Cash Payments as Income?
If you receive disability benefits, you don't need to count them as earned or total income. When you added the amount of your benefits to the first means test, you inadvertently increased your income. As a result, you failed the test right away.
Bankruptcy court allows individuals who receive SSA, SSD and SSI to omit disability payments from their means tests because the benefits aren't considered wages or taxable by the state. The same goes for temporary cash assistance provided by the state if your income falls below the poverty level.
However, you must still show that you receive disability benefits or temporary assistance in a separate section of the means test. The attorney will do this for you because he or she may need to obtain records of your benefits or cash assistance directly from the state to prove that you do or did receive them.
Once your attorney places the financial information above in the right section, the means test will calculate a new result. You should receive a passing test result that allows you to file Chapter 7 based on your actual income. Your attorney will also file your bankruptcy for you to make the process go faster.
If you have questions about the means test and filing Chapter 7, contact your bankruptcy attorney today. Click here to learn more.