What the Means Test Means for Individual Bankruptcy in Indiana

February 5, 2012 3:03 am Published by

You’ve all heard the expression “Less is more”, often in connection with fashion accessories or home décor.  Well, the means test for personal bankruptcy in Indiana is one example where less is a lot better than more!

The first step for moving forward with bankruptcy Chapter 7 in Indiana is meeting the “means test”.  “If you have too many means,” as Steve Bucci explains in Credit Repair Kit for Dummies, “you can’t declare Chapter 7.”

As a longtime debt consolidation lawyer offering Indiana bankruptcy help, one of the very first things we do with visitors to the Zuckerberg bankruptcy law offices is measure income, starting with look at the latest tax returns.

Next, as every lawyer for bankruptcy in Indiana knows, family income must be compared to the median income for families that size here in Indiana.

As the third step in the means test, we determine if you have “excess monthlyadding income” (money coming in over and above allowable expenses as specified by the IRS).  If that excess is more than $166.66 per month, it’s too high for you to qualify for Chapter 7 bankruptcy. Why $166.66? Because that’s how much it would take to pay off $10,000 of debt over a five-year period of time.  Again, less is better, if what you want to do is qualify for bankruptcy Chapter 7.

Now, if you “passed” that third part of the means test (your excess income was NOT as high as $166.66 per month), the fourth step measures whether you have at least $100 per month excess income, and then whether that $6,000 ($100 a month for five years) would pay off 25% or more of your debt.  Once again, less is more.  Only if you cannot eliminate 25% of your debt by paying $100 per month will you qualify to file Chapter 7 bankruptcy.

If it doesn’t look as if you can quite pass the means test, I and my colleagues the Anderson, Bloomington, Indianapolis, and Columbus bankruptcy lawyers might advise you to try one other tactic that is allowed under the new bankruptcy laws of Indiana – giving charity. The law allows you to donate up to 15% of your income to your place of worship and to count that as a regular expense.  Sometimes that pushes the income down enough to satisfy the means test.

Whoever coined the phrase “Less is more” must have had the Indiana bankruptcy means test in mind!

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This post was written by Mark Zuckerberg

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