After deciding to file for bankruptcy in New Jersey, someone with financial challenges still has other important decisions to make. The kind of bankruptcy they pursue will determine what risks the process involves, how long it will take to secure a judgment and even how long the credit bureaus will report the discharge.
For many people struggling financially due to low income and a lot of unsecured debt, Chapter 7 bankruptcy is the best option. Unlike Chapter 13 bankruptcy, this opportunity doesn’t require years of payments and results in a relatively quick discharge for those who file successfully. However, to qualify for Chapter 7 bankruptcy, an individual first has to pass the means test. What does means testing involve for those who are considering this form of bankruptcy in New Jersey?
Adjusted income and household size determine eligibility
Chapter 7 bankruptcy is a form of protection for those with below-average income and insurmountable personal debt. Only those who can show their income is lower than what other households of similar size enjoy can typically file.
The means testing process involves establishing an annual household income based on the last six months of paychecks and other sources of income. People can make some adjustments to their total income for specific expenses. There are deductions available for food and clothing expenses, as well as health care costs.
They then compare that adjusted household income to the current median for their household size in New Jersey. The Department of Justice maintains a list that it updates regularly establishing the median income for different household sizes in different states.
What if someone doesn’t pass the means test?
For some people, the process of adjusting income can be a challenge. For those who are close to passing the means test, it may be beneficial to repeat the process with the help of a lawyer. A professional experienced with the sometimes-confusing means testing process can help those who believe they may qualify but don’t want to make an assumption that leads to delays or challenges later in the process.
As the bankruptcy process is both complex and nuanced, seeking professional help can be a smart move for those pursuing a Chapter 7 bankruptcy filing in New Jersey.
