Understanding New Jersey’s Bankruptcy Means Test
Experienced bankruptcy lawyer guides debtors through Chapter 7
If you are struggling under a mountain of consumer debt, Chapter 7 bankruptcy could be your best option for relief. Through Chapter 7, you can quickly discharge many types of debt and start over with a clean slate. However, you must first pass a means test to be eligible. While this should be a straightforward process, there is room for error, but professional assistance can help. At the Law Offices of James C. Zimmermann, I help clients in Vernon, Wayne, Nutley, Pompton Lakes, Hackensack and vicinity get clear answers on their bankruptcy options. By taking a highly personalized approach, I gather all the data necessary to ensure a clear determination, so you can make the best decisions for your future.
How the New Jersey bankruptcy means test works
When Congress reformed the bankruptcy laws in 2005, they introduced the means test to make sure that only truly needy individuals could file for Chapter 7 bankruptcy. To pass the means test, you must earn less than the median income for a household your size in your state. Here in New Jersey, household incomes tend to be higher than in other states in the country. Here are a few of the listed medians as of May 2020:
- Single person household — $5,705.33 per month and $68,464.00 annually
- Two-person household — $6,854.08 per month and $82,249.00 annually
- Four-person household — $10,749.50 per month and $128,994.00 annually
Your median income is based on the average over the six months prior to your filing and includes all sources of revenue, such as:
- Wages or salary
- Rental income
- Dividends from stocks
- Interest income
If others in your household contribute toward your monthly expenses, those contributions also count as income. If you are below the median for your size household, the means test is not an obstacle to Chapter 7, but you still don’t automatically qualify.
Passing the test doesn’t ensure Chapter 7 eligibility
Even if you pass the means test, the bankruptcy court could deny your petition based on your monthly expenses and disposable income. If your expenses are very low and, in the view of the court, you have ample funds leftover each month, the court can require you to convert your petition to Chapter 13 bankruptcy.
However, you can get around the means test altogether if more than 50 percent of your debt is business related. For example, if you are a sole proprietor of a small business or you own an LLC, you might have gone into personal debt to support your business. But, before you decide to try to discharge your business debt through Chapter 7 consumer bankruptcy, you should talk to a knowledgeable bankruptcy attorney. There are other options in your case, such as Chapter 11 reorganization under the provisions of the Small Business Reorganization Act. I provide personalized counsel so you can make the best decision for your unique circumstances.
Contact a knowledgeable bankruptcy attorney for help with the Chapter 7 means test in New Jersey
The Law Offices of James C. Zimmermann assists New Jersey consumers with meeting the means test for Chapter 7 bankruptcy so they can discharge their eligible debts as quickly and efficiently as possible. To take your first steps toward a clean slate, call 973-764-1633 or contact us online for a free initial consultation. We have five North Jersey offices to serve you, located in Vernon, Wayne, Pompton Lakes, Hackensack and Nutley.