Chapter 7 Means Test in Arkansas

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There are many possible benefits of declaring Chapter 7 bankruptcy. Also known as liquidation bankruptcy, Chapter 7 allows individuals who are overwhelmed by significant debt to obtain an economic clean slate. Most debt is discharged and wiped away, providing a much-needed relief from your financial obligations. Since Chapter 7 erases most of your debt, the bankruptcy code reserves this form of monetary reprieve for individuals who are in dire financial need.

To file for Chapter 7, you must first past the means test. The means test is a federal formula that determines if you meet the requirements to receive protection under Chapter 7. The means test applies for individuals who are filing for Chapter 7 and have a higher income which means If your income falls below the Arkansas median for your household size, you will pass (or be exempt from the test) and may file for Chapter 7 bankruptcy.

If you are unsure whether or not you may pass the means test and declare Chapter 7 bankruptcy, DeLoache Law Office can help! Our experienced Jonesboro bankruptcy attorneys offer the insightful and astute guidance you need.

How does the means test work?

The means test was designed to determine whether or not bankruptcy candidates will have income available to pay back some of their debt obligations. If you do not qualify under the means test, petitioning for Chapter 13 bankruptcy might be your next best option.

The basic steps of the Arkansas Chapter 7 means test are as follows:

1. Calculating your current monthly income (CMI): This is an average of your gross monthly income over the last six months. If you have only recently experienced a financial setback, your attorney might advise you to reserve declaring bankruptcy for a month or two.
2. Compare your CMI to the median income for a household of your size in your geographic area: If your current monthly income is less than the median income for similar households in Arkansas, you automatically pass and do not need to complete the rest of the means test.
3. Determining your disposable income: If you did not automatically qualify by your CMI alone, you must determine if you have enough income left over after allowable expenses are deducted to pay off at least a portion of your debt. If your disposable income is over the allowable limit, you will fail the means test.
4. Decide if declaring Chapter 7 is best for you: Passing the means test is only part of the decision when determining whether filing for a liquidation bankruptcy would best protect the financial future of you and your family. Our supportive team of Arkansas bankruptcy lawyers can provide the strategic legal counsel required to choose which option can best deliver the financial fresh start you are looking for.

Hire DeLoache Law Office Today

Many of our clients come to our office concerned they have to be almost completely destitute to pass the means test. Nothing could be further from the truth. However, the means test is highly complex and best attempted with the assistance of an experienced bankruptcy lawyer.

Going it on your own may result in you missing out on deserved deductions or incorrectly calculating your current monthly income, both of which can cause you to fail the test.

At DeLoache Law Office, we have assisted thousands of clients in Arkansas achieve debt-free living and debt liquidation through Chapter 7 bankruptcy. For more than 20 years, our highly skilled Jonesboro bankruptcy lawyers have helped our clients complete the means test successfully so they can alleviate their financial hardship and end their debt nightmare.