Filing for bankruptcy is a financial decision that can give Georgia debtors significant relief as it allows them to have a fresh start when facing an overwhelmingly poor economic situation. In a Chapter 7 bankruptcy, a debtor will go through the process of liquidating available assets to pay back creditors and discharge other crippling debt allowing for a clean financial slate. However, it is important to understand that in Georgia, a Chapter 7 is only available to those who pass the bankruptcy means test.
Bankruptcy Means Test
Under Georgia Law, if you would like to file a Chapter 7 bankruptcy you must first pass the Georgia means test. This test is used to determine if your income is below the Georgia median for your household size. Simply put, if your income is below the median, you may proceed with filing a Chapter 7 bankruptcy. If your income is above the median, you will have to go through a more detailed means test calculation to see if a Chapter 7 bankruptcy is still an option, or you may have to file a Chapter 13 bankruptcy instead (a Chapter 13 bankruptcy is a debt repayment plan where debts are repaid over a period of 3-5 years).
Means Test Calculation
The means test calculation is done through a variety of forms provided by the Court. Because this calculation can be tricky, it is helpful to have the assistance of an experienced bankruptcy attorney as you go through the calculation.
The steps of the Chapter 7 means test calculation include:
- Determining your current monthly income—This determination is made by averaging your monthly income over the last six calendar months. (This calculation specifically excludes social security benefits.) You then multiply that number by 12 to arrive at your annual income.
- Next, you compare that income to the state’s median income for your family size, or how many people are in your household. At this point, if your income is below the Georgia median, then you can stop the calculation because you “pass” the means test and can file a Chapter 7 bankruptcy. However, if your income is above the state median, you will need to perform additional calculations to see if you can still qualify.
- If your income is above the median, you must calculate your disposable income. This is to see if you would have enough disposable income to repay your debts through Chapter 13 payment plan. You calculate this by subtracting your household expenses and bills from your monthly income. If your disposable income is low enough, you can still file for a Chapter 7 bankruptcy. If it is too high, meaning you have lots of disposable income, a Chapter 13 bankruptcy is the better option.
Find Out if You are Eligible for A Lawrenceville Bankruptcy
There are many benefits to filing for Chapter 7 bankruptcy, especially the benefit of moving toward financial freedom and a better financial future. If you want to see if you qualify for a Chapter 7 bankruptcy, reach out to the attorneys at The Ballard Law Group today. The Ballard Law Group offers a free initial consultation so that you can see if a Chapter 7 bankruptcy is available for you or if a Chapter 13 is your best option. Call us today at 404-220-9906 to schedule your free initial consultation at either our Atlanta or Lawrenceville office.