The means test is an important assessment that a bankruptcy court will make to ensure a person is eligible for protections under Chapter 7 bankruptcy. It involves comparing the filer’s income to the median income of the state where they live. If an Indianapolis resident’s income exceeds that of the state of Indiana, they may be disqualified from pursuing Chapter 7 protections.
Income, though, is a broad term when it comes to sources of financial gain included in the means test. It is important that prospective filers understand what income sources will be added up when they file for Chapter 7 bankruptcy. A knowledgeable bankruptcy attorney can help them decide what form of bankruptcy will serve them best.
Income for the means test
Income is often considered to be the wages a person earns from the work they perform. While this is true, income can also come from many other places. It can be paid in the form of tips, bonuses, or interest. It may be earned as dividends on investments, rents from properties, and support payments from legal orders. Income may come from some benefits like workers’ compensation and disability benefits, as well as pensions, unemployment payments, and annuities.
Preparing to pass the means test
Because income can come from so many different sources, it is important that Chapter 7 bankruptcy filers are prepared to identify and disclose all the possible types of income they have for the means test. If a person does not pass the means test, they should know that they may still have options to seek bankruptcy through Chapter 7 or Chapter 13. Their dedicated bankruptcy attorney can advise them of how best to address their specific situation.