If you want to file for Chapter 7 bankruptcy in Utah, you must pass the means test. This step identifies debtors who have the financial ability – or the means — to pay off their creditors through a Chapter 13 repayment plan. Anyone who doesn’t pass the test does not qualify for Chapter 7.
The Utah means test has two parts, both of which focus on your current financial situation. Few debtors fail the test but knowing what to expect when you file for Chapter 7 bankruptcy can help put your mind at ease.
Part 1: Household Income
The first part of the means test compares your current income to the state’s median income. If yours is lower, you should qualify for Chapter 7 bankruptcy.
In Utah, as in other states, your household size dictates the amount you can earn and still file for Chapter 7. The income amounts change frequently, but the current median income figures for the Utah means test are:
One earner – $61, 044
Two-person household – $66,641
Three-person household – $76,707
Four-person household — $86,717
If your family has more than four people, add $8,400 for each additional household member.
Part 2: Household Expenses
If your household income exceeds the state median, you’ll move on to the second part of the means test. This step determines if you have enough disposable income to repay all or some of your debts.
To determine if you qualify for Chapter 7 bankruptcy, you need to deduct certain expenses from your income and see how much remains – this is your disposable income. The standards for these expenses, which include any expenses that are necessary for health, welfare and/or income generation, are set by the IRS.
What if You Make Too Much to Qualify for Chapter 7 Bankruptcy?
Most debtors – even many high-income filers – pass the means test. If you happen to fail the test, discuss the matter with an experienced local bankruptcy attorney. There are exceptions to every rule and certain situations, including recent unemployment or a switch to a lower-paying job, could enable you to file for Chapter 7.
If no exception applies in your case, you can still seek protection by filing for Chapter 13 bankruptcy. And really, this could be a better option if you own property that a trustee would seize and sell in a Chapter 7 bankruptcy. Choosing Chapter 13 might also be a wise move if you have significant non dis-chargeable debts or if you want to make up missed payments in order to keep your home or car.
When you’re ready to find out if you pass the means test – and whether you qualify for Chapter 7 bankruptcy — turn to an experienced local bankruptcy attorney. In Salt Lake City and the greater northern Utah region, call on the Law Office of Davis & Jones, P.C., for expert advice.
After helping more than 20,000 Utah residents consolidate and discharge their debts, the Law Office of Davis & Jones has the expertise to ensure your case goes smoothly. To discuss the means test with our legal team, or for answers to all of your questions about qualifying for Chapter 7 bankruptcy, contact us to schedule a no-cost consultation today.