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Chapter 7 Bankruptcy: Passing the Means Test in Georgia
In 2005, Congress revamped the consumer bankruptcy laws and required individuals wishing to file a Chapter 7, or liquidation bankruptcy, to meet an income requirement known as the "means test." Each state, including Georgia, has different income requirements.
July 28, 2011 /HomeFamily PR News/ -- In 2005, Congress revamped the consumer bankruptcy laws and required individuals wishing to file a Chapter 7, or liquidation bankruptcy, to meet an income requirement known as the "means test." Each state, including Georgia, has different income requirements.
Essentially, two different types of consumer bankruptcies are available to individuals unable to keep up with debt obligations (one and per sentence. this is a long one. either break it up or scratch what I marked up)--Chapter 7 bankruptcy and Chapter 13 bankruptcy.
A Chapter 7 bankruptcy is a type of bankruptcy that allows consumers to discharge certain unsecured debt like credit card balances. A Chapter 13 bankruptcy allows consumers to consolidate their debts and make monthly payments to pay off their debt over a 3-5 year period. The former, understandably, is attractive to many consumers.
Passing the Means Test; Depends on Your State Median Income Level
In 2005, Congress reformed the bankruptcy laws to make it more difficult for just any debtor to file for Chapter 7 bankruptcy; the idea being that if consumers could feasibly pay off some of their debt with the disposable income generated in their household, then they should be required to file a Chapter 13 bankruptcy instead.
So today, individuals wishing to file a Chapter 7 bankruptcy must pass a "means test," or essentially, prove they do not have the means to pay some or all of their debt.
Whether debtors have the "means" to pay some or all of their debt is determinative on whether they (or their household income) exceeds the income level set by the state in which they reside. Income levels are different based on debtors who file as single-earners, debtors who file as two-person households, debtors who file as three-person households, etc.
Median Income Level for Debtors in Georgia
Median income levels in Georgia are as follows:
- Median income level for a single-earner is $39,384
- Median income level for a two-person household is $52,024
- Median income level for a three-person household is $56,682
- Median income level for a four-person household is $69,239
An additional $7500 is added to household sizes exceeding four-people in Georgia.
If debtors are below the median income level based on their household size, then they automatically qualify for Chapter 7 bankruptcy protection.
Individuals above Georgia's Median Income Level
Individuals who make more than the state's median income level are not automatically barred from filing a liquidation bankruptcy. Calculations that involve allocating monthly expenses and exemptions will determine whether individuals will be allowed to file. It's important to consult with an experienced Chapter 7 bankruptcy attorney knowledgeable in Georgia's bankruptcy laws to determine eligibility.
Chapter 13 bankruptcy may be a viable option for individuals who do not meet eligibility requirements to file a Chapter 7 bankruptcy. Chapter 13 bankruptcies require a debtor to make monthly payments over a 3-5 year period; however, many debtors only pay a portion of their debt during this time. Further, interest on loan balances stops accruing and collection and judgment actions stop during this period.
Article provided by The Slomka Law Firm, P.C.
Visit us at www.slomkalawfirm.com
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