Means Test and the Chapter 7 Bankruptcy

Chapter 7 Bankruptcy is also known as "liquidation" It is the simplest and quickest form of Bankruptcy and is available to individuals, married couples, corporations and partnerships. A trustee is appointed by the court to gather and sell the non-exempt property and use the spoils to pay the creditors.

In general the Chapter 7 cases are "no-asset' case, that is, the debtor does not have non-exempt property for the trustee to sell.

Means Test

Means test required by Federal Bankruptcy law is an eligibility test to file under Chapter 7 Bankruptcy.

Eligibility Criteria:

If your income is below the median income for families in Georgia, based on Census Bureau statistics
If the median income for families in Georgia is greater, income over the past six months is considered, along with mortgage and car payments, back taxes and child support due, and school expenses up to $1,650 per year

Non eligibility for a Chapter 7 Bankruptcy requires you:

To pay at least $6,000 ($100/month) to unsecured creditors over five years
And your option would be a Chapter 13 Bankruptcy

The U.S. Trustee Program will apply the median family income data to all cases filed on or after March 15, 2009 and is subject to Census Bureau updates.

For Georgia, for cases filed after March 15, 2009 the median income:

For a single wage earner is $40,760
For a family of two, it is $54,054
For three, $61,959; and for four, $71,554
Add $6,900 for each individual in excess of Four

Filing Chapter 7

In the Bankruptcy Court a Bankruptcy starts with the filing of

The official petition
Schedules
A list of all of your creditors
The amount and type of their claim
The source, amount, and the frequency of your income
A list of all of your property
A list of your monthly living expenses.

Automatic stay

An automatic stay prevents your creditors from trying to collect on your debts as soon as you file for Bankruptcy unless they have a “cause" to show the Bankruptcy judge to continue with collection
The Automatic stay preserves your property and gives you a break from litigation
The trustee takes control of any property you do not get to keep
From the sale of your property, the trustee pays the expenses of the administration of the case
Any remaining money goes to creditors according to the priority of the claims
Any wages you earn after you file the case are yours

Bankruptcy does not wipe out voluntary liens, like mortgages and deeds of trust, or tax liens and a lender has the right to foreclose if you do not pay

If there is less than $5,000 in equity in your house, you can claim a "homestead exemption" and keep the house, as long as you pay the mortgages.
If there is more than $5,000 in equity, it is possible you could lose your home. In that case, you may wish to consider a Chapter 13 Bankruptcy.
If there is more than $3,500 equity in your car, you may be able to pay the difference between the value of the car and the $3,500 equity allowed to the Chapter 7 trustee and keep the car.
If you still owe money on the car, you can choose to reaffirm the debt to the secured lender.
Under the new law, you have to reaffirm your car loan within 45 days after the "341 Meeting".
You also have the option to redeem the car within 45 days of the "341 Meeting" by buying it from the secured creditor in a single payment for its present value.