If you ever consider filing bankruptcy, there is a long, mathematical formula that must be calculated by your attorney before determining what Chapter of bankruptcy you qualify for. Generally, unless you are behind on your mortgage or car payment, or owe back taxes and want to catch up on the payments, you are going to want to file Chapter 7, which wipes out 100% of your unsecured debt (secured debt being debt on which you have a mortgage or a lien (house or car). In order to file for Chapter 7 you have to qualify under this mathematical formula, which is referred to as the Means Test.
The Means Test uses a few basic assumptions. First and foremost, it starts with looking at the median income for the region (Oklahoma). If you make less than the median income, you automatically qualify for Chapter 7. If you make more, then the calculations start. You get credit for utilities, vehicle expenses, basic living amenities (though everyone is assumed to spend the same, made up amount on these items). Then, through variety of techniques, there are numbers plugged into the equation that are specific to you, the potential debtor (these would include actual mortgage payments, child support payments, car payments, among others). The equation is very lengthy and of course, there are exceptions to every rule. Needless to say though, as long as you are current on your mortgage payment(s) and car payment(s), you want to be able to pass this Means Test.
Once or twice a year the government changes the basic numbers used in the Means Test, based on the economy, inflation, and other factors. Today, November 1st, the new Means Test numbers go into effect. This means that for some people, even though they may not have qualified for a Chapter 7 yesterday, they may today. If you’ve been considering bankruptcy, and that’s been an issue, it’s time to re-address you financial situation. The new numbers are here.