Georgia Bankruptcy Law: What to Know About The Means Test

When facing financial difficulties, understanding Georgia bankruptcy law is crucial for debtors looking to find relief. One significant aspect of this law is the means test, which helps determine eligibility for filing Chapter 7 bankruptcy. In this article, we will explore what the means test entails and its implications for individuals considering bankruptcy in Georgia.

The means test is a formula used to assess whether an individual’s income is low enough to qualify for Chapter 7 bankruptcy. Chapter 7 is designed to liquidate a debtor's non-exempt assets to pay off creditors. If an individual's income exceeds the state median income, they may not qualify for Chapter 7 and must look into Chapter 13 bankruptcy instead, which involves a repayment plan.

To start, the means test involves two primary steps:

1. Calculate Current Monthly Income (CMI): This step involves taking the debtor's average income over the six months prior to filing for bankruptcy. CMI includes all sources of income, such as wages, rental income, and unemployment benefits. In Georgia, the average monthly income threshold is based on the state median income for households of the same size.
2. Compare Income to the State Median: Once the CMI is calculated, it is then compared to the Georgia median income. If the CMI is below the median income, the debtor qualifies for Chapter 7. If it is above, the individual must complete the second part of the means test, which involves deducting allowable expenses from their income.

The second part of the means test assesses the debtor’s disposable income, which is calculated by deducting allowed expenses from their current monthly income. These deductions include necessary living expenses such as housing, utilities, and transportation costs. If the remaining disposable income is low enough, the debtor may still qualify for Chapter 7 bankruptcy despite a higher-than-median income.

It is important to note that the means test can appear complex and nuanced. Debtors in Georgia may want to seek the guidance of a qualified bankruptcy attorney to navigate the process effectively. An attorney can help ensure all income and expenses are accurately reported and that the debtor’s rights are protected throughout the bankruptcy process.

In summary, understanding Georgia bankruptcy law and the means test is essential for anyone considering bankruptcy as a financial solution. The means test determines eligibility for Chapter 7 bankruptcy based on income levels, and accurately completing this test can significantly impact the outcome of a bankruptcy filing. For those who qualify, it offers a path towards financial recovery and a chance to reclaim control over their financial future.