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Are You Required to Take the Means Test to Declare Bankruptcy in California?

Being in over your head is not enough in and of itself for you to qualify for bankruptcy. Many people must take the Means Test, which is a complicated calculation that the California bankruptcy court uses to ensure that cases aren’t incorrectly filed as Chapter 7. If the person declaring bankruptcy has an income that is higher than the median income level for their household, then the court may decide that the person in question is attempting to abuse the bankruptcy code.

Not everyone has to take the Means Test, and those who do and are told they don’t qualify may be able to rebut the presumption. If you need to rebut a decision then you’ll need to contact The Law Offices of Paul Y. Lee at 951-755-1000 right away so we can consider your specific case. Otherwise, read on to see who is required to take the Means Test and who isn’t.

Who exactly is required to take the Means Test?

If you are a debtor that has an income that’s greater than the state’s median income level for a household of your size, then you’re required to take the Mean Test. In California, the exact amount of the state’s median income level changes yearly but is currently $47,234 for households with one earner. That amount goes up the more people earners there are in a home and down the more non-earners live in a household. For exact numbers, contact The Law Offices of Paul Y. Lee and ask for information about the current Means Test.

Who isn’t required to take the Means Test?

As we’ve mentioned, if your income is below the state median then you don’t have to take the Means Test because you automatically qualify to declare Chapter 7 bankruptcy. That said, if you have any assets that are nonexempt, then they may be subject to liquidation.

There are others who don’t have to take the Means Test including disabled veterans, who can skip the Means Test no matter what their income is, men and women are on active duty with any military branch, and business debtors. Note that with a business debtor, while the Means Test may not be applicable, the business usually must be shut down and liquidated. Assets that aren’t exempt – like equipment or leftover inventory – will usually be sold off with proceeds going to creditors.

The Means Test is confusing – Call on the professionals for help

What should be simple isn’t – the Means Test can be complicated. There are actually a number of other issues that can affect it. For example, what exactly is income? And what expenses can be claimed? What if you have a special circumstance? These and other complexities of bankruptcy are the reason that we recommend working with a bankruptcy attorney.

Reach out to The Law Offices of Paul Y. Lee today by calling 951-755-1000 and requesting your free consultation. We will look for the best options for your unique situation. Remember that no matter how hopeless your financial situation may feel today, there are always options. Call us now to learn more about them.