My wife and I made the decision to open a residential cleaning business. We needed enough money to get the equipment, do a bit of advertising and get the licensing and insurance to protect ourselves and our customers. For about two years, things went very well, but then, things took a terrible spin for the worst after we hired a few employees to help us with the workload. Since then, we have gone bankrupt and have gone back to working full time jobs. If you are struggling with your business and considering bankruptcy, this blog can give you some answers to the many questions that you have.
When financial troubles pile up, you may be considering the bankruptcy option. Nothing can allow you to make a fresh start faster than filing chapter 7 bankruptcy, but the ramifications can affect you for years to come. Not everyone can file for bankruptcy, so one of your first steps might be to make sure that this will be an option for you. There is one major potential stumbling block that could affect your ability to file, so read on to learn more about the means testing and your ability to get debt relief.
Limitations on Income
In the past, almost anyone could file for a chapter 7 bankruptcy. This led to a boom in consumers filing bankruptcy repeatedly, and with consumers who actually had the means to pay their bills filing bankruptcy just to avoid their debt loads. The result was an update on the federal bankruptcy code in an attempt to stop repeat and wealthy filers from misusing bankruptcy for personal gain. This resulted in the so-called "means test", which limits people with the means to pay their debts from filing if their income is too high. After all, what you are "declaring" when you declare bankruptcy is that you cannot pay your bills based on your current income.
The Means Test
The change in the bankruptcy code resulted in a number of changes and the addition of several more "hoops" for filers to jump through. Now, two educational classes must be completed before your bankruptcy can be finalized. One of these classes, is actually the completion of a budget that shows your income versus your monthly bills. Your income is then compared to the median income in your state. If your income exceeds the limit, you may be barred from filing, since this "class" must be completed before you even file.
Deductions to Income
If your income is too high, don't give up just yet, since the income is only part of the calculation. It is your financial burden together with your income that is considered. If you have extraordinarily high medical bills, or example, you may still qualify to file for a chapter 7 bankruptcy. Other potential deductions include high mortgage payments, higher transportation costs, and more.
Do the Math
You can use an online calculator meant to give you a general idea of what passing the means test would be, but remember that only a bankruptcy attorney can give you the most accurate answer. So give the calculator a try, but speak to a bankruptcy attorney, such as Jeffrey S. Arnold, Attorney at Law, P.C., before you give up on the chance to have your own fresh financial start.
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