Forty years ago, the only criteria for a bankruptcy was whether your debts exceed your non exempt assets. Today, the qualification for a bankruptcy is far more complicated.
That’s why you need an attorney for a bankruptcy.
There are three tests which your finances must be put through to qualify.
a median test
a means test and
a good faith test.
The tests do not focus on your assets but on your past and future income.
The median test is straightforward
The median is the halfway point in income for your household size in Iowa . Did your household income exceed the median for your household size ? If you have a household of four, was your income less than $78000 for the last year ?. If it was , then you pass the median test and the means test is not applicable. If you made $80000, then your income was be reviewed under a means test.
The means test over the past six months
The means test takes the last six months income and reviews it against allowable expenses for the last 6 months. The expense allowances are fairly generous. This test is designed to get at high rollers that spend themselves into debt planning all along to file a bankruptcy. A normal Iowan with typical debts has nothing to worry about.
The last test is the “good Faith” test
As part of your case filing you will fill out an income and expense schedule for the next year. If there is something like a job change or pay increase that would yield you substantial excess funds, then a chapter 7 bankruptcy will not work. Normally, people are near zero or even upside down looking into the future. In the last ten years since the latest Bankruptcy act was passed, I have had only 2 or 3 clients that had problems with the goods faith test.
Do not make the mistake of trying to decide yourself as to whether you qualify
My first appointment is always no charge, I review the 3 tests with you and usually can tell whether there might be a problem.
Bankruptcy can give you a fresh start
Call me with any questions at 319-373-1989
John M Heckel, Iowa Bankruptcy Attorney since 1974