Passing the Bankruptcy Means Test Can Be a Matter of Timing

Timing can be critical in bankruptcy

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For North Carolina consumers looking for financial help, Chapter 7 bankruptcy offers the most significant solution for debt relief. However, not everyone will qualify. Depending on your income and household size, you might have to pass the Means Test. In some cases, timing can be key to getting the thumbs up to get the greatest debt relief.

Means Test Timeline Is Critical 

Because the Means Test window is six months, timing matters if your income fluctuates often or has recently. The Means Test looks at your ability to service your debt and assesses whether you have the “means” to do so. The test itself takes an annualized snapshot of your income and expenses but extrapolates from the last six months of data.

So, if your income has changed and is lower over the last six months than it usually is, a well-timed Chapter 7 filing might get you approval when otherwise you might not pass the Means Test. Your income might fluctuate for many reasons. For instance, if you were unemployed, but recently got a great job, filing bankruptcy to get a clean financial slate before your new salary kicks in can be a sound strategy.

Also, if your income is seasonal, you might have lower income for half the year. You cannot lie or hide assets or income from the bankruptcy court – that would be fraud. However, you can make strategic decisions about your timing to file Chapter 7. You can obey the letter of the law while deciding how to get the best results for your debt dilemma.

Other Circumstances That Might Affect the Means Test 

Suppose you had an auto accident and, as a result, couldn’t work. That means your income is down and you likely have significant medical expenses. You might get an insurance settlement to cover some of your debt, but perhaps it doesn’t take care of all your obligations. If you file for Chapter 7 relief within six months of receiving your financial settlement, that will count as part of your income.

However, if you wait for six months after you get the check to file Chapter 7, you won’t have to count that amount as income for bankruptcy purposes, but you can still get relief for your leftover medical bills and other debt. Another circumstance where timing might matter is if you’re being downsized and know it’s coming. If you have debt piled up but know your income will drop soon, waiting to file might be smarter.

What Are the Means Test Levels for North Carolina?

Household size determines the Means Test level to qualify for Chapter 7 automatically. For a household of one, the North Carolina income level is $42,946. For a household of two, it’s $55,722, and for three, it’s $64,521. For a household of four, the income limit is $72,830. For households larger than four, it’s $72.8k plus an additional $8,400 for each person over four.

But even if your income exceeds these Means Test levels, you might still be able to file Chapter 7 bankruptcy. If you don’t meet the income threshold, passing the Means Test requires you to demonstrate your inability to service your debts on your current income. In fact, you can make a great amount of money and still file Chapter 7 bankruptcy so long as your debt outweighs your income. 

Find Out If You Qualify for Chapter 7 Debt Relief 

You don’t need to figure out on your own if you qualify for Chapter 7 debt relief. Just gather up your financial documents and schedule a free consultation with an experienced and reputable North Carolina bankruptcy attorney. Look for a practice that specializes in bankruptcy and doesn’t practice general law. Your initial consultation should be free.

A bankruptcy lawyer can advise you if your debt dilemma is best served by filing for bankruptcy or if you might be better off with another solution. With that advice, you can make an informed decision. To find out more, contact the Law Offices of John T. Orcutt. Call +1-833-627-0115 now for a free North Carolina bankruptcy consultation at one of our convenient locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro or Wilmington.