Navigating financial difficulties can be overwhelming. Thankfully, you can consider bankruptcy as a debt management option if your financial circumstances have become so unmanageable that you are in need of a genuine “way out.”
Before filing for bankruptcy, it’s crucial to undergo a means test. This test helps determine eligibility and the type of bankruptcy suitable for your situation. Exploring the benefits of completing a means test before declaring bankruptcy can help you understand why this bankruptcy requirement is so important.
Determines eligibility
The means test critically evaluates your financial standing to determine your eligibility for bankruptcy relief under Chapter 7 or Chapter 13. It assesses income, expenses and debts to ascertain whether you qualify for a debt discharge or repayment plan.
This test compares your income to the median income in New Mexico for a household of similar size. If your income is below the state’s median, you’ll typically qualify for Chapter 7 bankruptcy. If it exceeds the median, further expenses and disposable income are evaluated to determine Chapter 13 eligibility.
Completing a means test provides clarity on whether you’ll qualify for Chapter 7 bankruptcy or if Chapter 13 is a more suitable option. This can help ensure you pursue the right path towards financial relief. This way, you can avoid potential complications due to ineligibility.
Tailored repayment plans
Suppose you’re ineligible for Chapter 7 bankruptcy due to higher income. In that case, completing a means test facilitates the development of a feasible repayment plan under Chapter 13. This plan consolidates debts and establishes manageable monthly payments based on your disposable income. This may allow you to enjoy a structured debt repayment while retaining your assets.
Avoids dismissals and delays
Failure to complete a means test accurately can lead to the dismissal of bankruptcy petitions or delays in the process. You can mitigate the risk of setbacks by proactively undergoing the means test and ensuring compliance with eligibility criteria. This can help ensure a streamlined bankruptcy process and timely resolution of financial challenges.
Completing a means test before filing for bankruptcy offers several benefits, including eligibility determination, tailored repayment plans and avoidance of dismissals or delays. By understanding the significance of the means test, you can make informed decisions regarding bankruptcy, potentially paving the way for a smoother financial recovery journey.