The Bankruptcy Means Test in Georgia: What It Is and How It Works

The bankruptcy means test is a crucial component of the bankruptcy filing process, particularly important for individuals considering Chapter 7 bankruptcy in Georgia. This test determines whether a debtor’s income is low enough to qualify for Chapter 7 liquidation bankruptcy or if they need to file for Chapter 13 repayment bankruptcy.

In Georgia, the means test is designed to prevent high-income earners from taking advantage of the bankruptcy system. It assesses a debtor’s current monthly income (CMI) against the state’s median income for a household of the same size. Here’s a deeper look at how the bankruptcy means test works in Georgia.

Understanding the Calculation of Current Monthly Income

The means test uses your current monthly income, which is calculated based on the average of your income over the six months preceding your bankruptcy filing. This includes all sources of income, such as wages, business income, unemployment benefits, and any other forms of income. It’s important to note that certain deductions, like taxes and mandatory retirement contributions, are excluded from this calculation.

Median Income Levels in Georgia

The next step in the means test is to compare your current monthly income to the median income levels established by the state of Georgia. The median income limits are subject to change, so it’s essential to check the latest figures on the U.S. Trustee Program's website or consult with a bankruptcy attorney. If your income is below the state’s median for your household size, you pass the means test and can file for Chapter 7 bankruptcy.

Calculating Disposable Income

If a debtor’s income exceeds the median level, they must complete further calculations to determine their disposable income. This involves listing allowable expenses, which can include standard living expenses such as housing, food, transportation, and healthcare. The difference between CMI and allowable expenses helps assess if the individual can repay a portion of their debts over time.

What Happens After Completing the Means Test?

If you pass the means test, you are eligible to file for Chapter 7 bankruptcy, which can lead to the discharge of most unsecured debts like credit cards and medical bills. However, if you fail the means test, you may still have the option to file for Chapter 13 bankruptcy, which is a repayment plan that allows you to repay your debts over three to five years.

Considerations and Recommendations

Navigating the bankruptcy means test can be complex, and it’s beneficial to seek guidance from a qualified bankruptcy attorney in Georgia. They can provide invaluable insights into the latest income limits, help with calculations, and guide you through your options based on your financial situation.

In conclusion, understanding the bankruptcy means test is essential for anyone considering filing for bankruptcy in Georgia. It plays a significant role in determining eligibility for Chapter 7 bankruptcy and can provide a pathway to financial relief.