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Qualifying for Bankruptcy

Providing Minnesota Bankruptcy lawyer evaluations on qualifying for bankruptcy in Minneapolis, St. Paul, Bloomington, Edina, Roseville and all of Minnesota.

A person who is considering bankruptcy needs to have information on qualifying for bankruptcy in Minnesota. Consumers who find they needing debt reliefconsider going through a bankruptcy evaluation with a Minnesota bankruptcy attorney to determine whether they qualify for Chapter 7 bankruptcy or Chapter 13 bankruptcy. The means test may be used to evaluate the qualification of a consumer for bankruptcy. This qualification review covers a consumer's financial ability to deal with his or her current debt situation. The Means test helps to evaluate whether a consumer can pay back a portion of his or her debt through a Chapter 13 plan of repayment and, if not, whether the consumer's financial situation is such that he or she may qualify for relief under Chapter 7. The means test reviews and evaluates the debtor's income level and expenses allowable under prevailing bankruptcy law. The bankruptcy law requires the establishment of median income standards for the state in which the consumer resides, together with IRS collection standards for certain expense categories that are to be used in the means test to determine whether a debtor may qualify for a Chapter 7 or a Chapter 13 bankruptcy. Generally, a consumer who wants to qualify for Chapter 7 must make less than the median income and not exceed allowable living expenses. In some circumstances above median income debtors may still qualify for Chapter 7 bankruptcy if their disposable monthly income after all allowable deductions have been made permits them to file a Chapter 7. It is also possible for a below median income debtor to qualify for Chapter 13 bankruptcy, which may allow the debtor to save his or her home, assuming the debtor has sufficient income after payment of basic expenses to cure the default through a Chapter 13 plan.

Bankruptcy Evaluation Process

Consumers who desire a bankruptcy evaluation, including going through the means test, need to gather the necessary financial information to conduct the evaluation correctly. At a minimum, consumers should gather the following information:

  1. All income documentation for the past six months including not only pay stubs, but also any other financial assistance provided to the consumer as well as all income from other sources for both the debtor and his or her spouse.
  2. A complete list of all monthly expenses.
  3. A list of all secured debt such as mortgage and/or automobile payments.
  4. The past due amounts, if any, on all secured debt.
  5. All income from investments, interest, dividends, pensions, retirement income, social security benefits, disability benefits, unemployment compensation, worker’s compensation, child support, alimony or spousal maintenance.
  6. All business income. This should include gross receipts from the operation of the business, the cost of goods sold as well as all business expenses.
  7. Contributions to household expenses and income from others, such as spouses, partners, roommates, family members and others who contribute to the debtor’s income and/or expenses, whether they reside with the debtor or not.
  8. The debtor’s household size including all persons currently residing with the debtor such as the debtor’s spouse, if any, children, other family members such as parents, brothers, sisters, other relatives, roommates, significant others, partner and other household members.
  9. If the debtor is married and his or her spouse resides elsewhere, then information about the spouse’s income and expenses will be needed as well.

Means Test Considerations

In evaluating the debtor's situation with the means test an important consideration is whether the income exceeds the median income of the debtor state of residence. A debtor must make sure to use the most current figures applicable under the bankruptcy law at the time of the evaluation in order to determine whether or not the debtor's income falls above or below the state's median income. In addition to the median income, debtor’s household size is also considered as well. Again it is important to make sure that all figures used in these calculations are the most current available under the applicable bankruptcy laws. Once all of the calculations for the means test had been completed to determine whether the debtor has actual disposable monthly income, the attorney will have a good estimation as to whether the debtor can qualify for a Chapter 7 or Chapter 13 bankruptcy. The foregoing is only a brief overview of the bankruptcy evaluation process and does not include all of what would be done by a skilled bankruptcy lawyer conducting a bankruptcy evaluation including performing the means test. Given the importance and complexity of doing a proper bankruptcy evaluation, which includes conducting a means test, consumers may find it useful to consult with an experienced bankruptcy attorney who can provide legal help to them in performing the evaluation.

Experienced Minnesota Bankruptcy Lawyers

The experienced Minnesota bankruptcy lawyers at Neff Law Firm, P. A., have done many Bankruptcy evaluations. They have helped many consumers perform the means test. Consumers who are interested in meeting with an attorney from Neff Law Firm, P. A., may call the firm’s Central scheduling telephone number of 952-831-6555 to set up an appointment.

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