Bankruptcy Facts: The Means Test

California Test Determines Eligibility

If you are planning on filing for a personal bankruptcy claim under chapter 7 in California, there are certain legislative procedures that you must follow. California, along with several other states in the U.S., requires that you pass what it calls a ‘means test’ in order to determine whether you qualify to file for Chapter 7 liquidation, or must instead file under Chapter 13 ‘financial restructuring’. With the help of a skilled Murrieta bankruptcy lawyer, to guide you through this process, you can make the best decision possible to ensure your financial future.

The reason that a means test is required by the state is a complex one. Chapter 7 bankruptcy is often referred to as ‘liquidation’, because the client utilizing this claim ahs a portion of their assets seized by the government in order to pay a portion of their debt. This is generally only done when the client is unable to pay off their debt under normal circumstances, because the money made from liquidating the assets is rarely as much as would have been repaid under the debt normally. Thus, it is in California’s best interests to ensure that only those who lack the means to pay the debt normally be allowed to file for Chapter 7.

Means Test Specifics

The way that the means test works, in brief, is that the judge will make a determination of the client’s income. This is then compared to the state median income. If the client has a lower than average income, he or she automatically qualifies for Chapter 7. If not, they will have to file for a Chapter 13 restructuring.

This test is a fairly simple one, but knowing if you qualify is not always easy. This is why it is vital that you discuss your situation with an attorney who is knowledgeable about bankruptcy law who can help steer you through the process.

A Bankruptcy Lawyer Today

Please, do not hesitate to call the firm of Singleton Smith to talk to our legal team about your options. A Murrieta bankruptcy attorney from our firm can help you make the best decision you can.

Contact a Murrieta bankruptcy lawyer now!