Select Bankruptcy under “Court Type” and enter your ZIP code, and then click “Go”. Protection against family violence under the Family Violence Prevention and Services Act or other applicable federal law. Your gross household income means the total amount of money you—and anyone living with you in your home—earned within one calendar year, before taxes. Some judges look to your ability to pay as part of the "totality of the circumstances" test (Section 707(b)(3)), and will bar you from Chapter 7 bankruptcy, whether your income is above or below the median. If the debtor’s current monthly income exceeds the state median, the Bankruptcy Code in Stage 2 looks at the income minus certain allowed expenses, over five years. Filling out the average monthly income section should be straightforward. The IRS employs the same metrics it uses to determine the amount of money delinquent taxpayers can afford to pay in back taxes. If you have any questions about the form, you should reach out to a bankruptcy professional before signing it. Credit Karma Offers, Inc. NMLS ID# 1628077 | Licenses | NMLS Consumer Access, Click to share on Twitter (Opens in new window), Click to share on Facebook (Opens in new window), Click to share on Reddit (Opens in new window), Image: Couple going over documents with person behind desk. Then, you’d multiply that by 60 to get a total disposable income over the next five years of $6,000, which you would write on line 39d. Our marketing partners don’t review, approve or endorse our editorial content. It requires no registration or disclosure of personal information. This comparison takes place in Part 2 of Form 122A-1. Follow the instructions on Line 3 of the form and subtract any portion of your spouse’s income not used to pay for household expenses. The means test presumes that low-income debtors can’t pay back creditors and therefore, aren’t abusing the system by filing for Chapter 7 bankruptcy. This includes your income from work as well as any other sources, like money you may have taken from a retirement fund or income from the sale of a house. IRS National Standards are used by the IRS in evaluating ability-to-pay (Form 656 and installment plans) and the bankruptcy court for the means test. You’d place this number on line 13 of the form. Image: Woman lying on the floor of her living room with her laptop open, considering her student loan debt relief options, Image: Illustration with purple background and American flag with a hand pointing to the flag, Check My Equifax® and TransUnion® Scores Now, Form 122A-1: Chapter 7 Statement of Your Current Monthly Income, Form 122A-2: Chapter 7 Means Test Calculation. But since we generally make money when you find an offer you like and get, we try to show you offers we think are a good match for you. Continued contributions to the care of household or family members who are elderly, chronically ill, or disabled. The Chapter 7 means test helps determine if you qualify for Chapter 7 bankruptcy. Ownership Expenses – Expenses are allowed for purchase or lease of a vehicle. and do not deduct any operating expenses that you subtracted from income in lines 5 and 6 of Form 122A–1. If you don’t remember how much income you’ve received from each of these sources, it may help to look through the previous six months of bank statements. If your expenses differ from month to month, enter the average expense. At the offices of Lee Norton Bain, Attorney at Law, in Georgetown, I represent clients in all types of consumer bankruptcy matters, including helping people calculate whether they are eligible to file for Chapter 7 or Chapter 13 bankruptcy using the means test.. A Sampling Of Allowable Deductions. Operating Expense: An operating expense is an expense a business incurs through its normal business operations. Taxes: federal, state and local, including income, self-employment Social Security and Medicare. Chapter 13 debtors always have to complete the Means Test. Married and your spouse is not filing for bankruptcy with you, and you and your spouse are one of the following: Living in the same household and not legally separated, The number of people who could be claimed as exemptions on your federal tax return, plus the number of any additional dependents you support. App Store is a service mark of Apple Inc. You may also be exempt from the means test requirements if more than half of the debt you owe is nonconsumer debt (typically business debt) rather than consumer debt. What’s next after filling out Form 122A-1 and Form 122A-2? $_____ Additional Expense Deductions These are additional deductions allowed by the Means Test. All Rights Reserved. Here's help. If your average monthly mortgage or car loan payment is greater than the IRS standard housing or car ownership allowance, you can deduct the higher amount on the means test. Group Insurance Premium, Supervisors’ Salary, Workmen Compensation Insurance, Contribution to ESI etc. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. If your expenses differ from month to month, enter the average expense. income in line 3 and do not deduct any operating expenses that you subtracted from in income in lines 5 and 6 of form 22A-1. If you meet the requirements on Form 122A-1Supp (Statement of Exemption from Presumption of Abuse Under § 707(b)(2)), you may not have to take the means test at all. Lance Cothern is a freelance writer specializing in personal finance. Whenever this part of the form refers to you, it means both you and your spouse if Column B of Form 22A–1 is filled in. Whenever this part of the form refers to you, it means both you and your spouse if Column B of Form 22A–1 is filled in. On the means test, you’re allowed a standard operating expense deduction for up to two cars (a single debtor is normally allowed a deduction for only one vehicle). Each business is unique and every industry has its nuances, but these items are general enough to apply to most industries. Read our. Then, move across that row to look at the column that pertains to your family size. iPhone is a trademark of Apple Inc., registered in the U.S. and other countries. Step 2: Fill in your marital and filing status. Once you’ve completed Parts 1 and 2 of Form 122A-2, you’ll calculate your monthly disposable income in Part 3 as seen in the below image. Education for employment or for a physically or mentally challenged child. Possibly also a deduction for an older car without a payment. and do not deduct any operating expenses that you subtracted from income in lines 5 and 6 of Form 122A–1. Insurance, Preliminary repairs to assets, Repairs and renewals etc. The Means Test in determining the monthly expenses for the person filing bankruptcy applies the, monthly expense amounts specified under the National Standards and Local Standards. Since your disposable income in line 39d is less than $7,700 in this example, you would check the first box in line 40, indicating that there is no presumption of abuse. The 2005 bankruptcy law (BAPCPA) requires all persons to complete a means test (Official form B122A) before filing for bankruptcy. The means test first examines your income in order to determine if you fall in the upper or lower half of earners in your state. The operating expense allowance includes costs associated with driving a car such as gas, maintenance, registration, and insurance. Enter your name, the bankruptcy court you filed in, and your case number if you have one. This free online calculator computes your means tests results, applying applicable local standards for Bernalillo County New Mexico, as required by federal law. The Chapter 7 bankruptcy means test may seem confusing at first, but it’s easier to understand if you break it down. If you get lost or have more questions about whether bankruptcy is right for you, find a bankruptcy professional to help. This should mirror the case information from Form 122A-1. A single taxpayer is normally allowed one automobile. If you decide to move forward with Chapter 7 bankruptcy, you can file with the help of a professional, by filling out the necessary forms yourself or using a service like Upsolve. Operating costs include maintenance, repairs, insurance, fuel, registrations, licenses, inspections, parking and tolls. and do not deduct any operating expenses that you subtracted from income in lines 5 and 6 of Form 122A–1. Form 122A-2: Chapter 7 Means Test Calculation. Add lines 6 through 23. A bankruptcy means test determines whether your income exceeds a certain amount. It’s also important to remember that bankruptcy is a serious legal decision that comes with real consequences. Just because you fail the Chapter 7 bankruptcy means test today doesn’t mean you’ll fail it again in a couple of months. 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