How does a means test to apply Chapter 7 bankruptcy?

One of the requirements for filing Chapter 7 bankruptcy will undergo a "means test" and to report current monthly income to the bankruptcy court. A means test is a mathematical calculation performed in three stages on income and expense sheet that makes people who are abusing the bankruptcy system. If a debtor qualifies Chapter 7 at any step in the calculation of three steps, then he / she is automatically eligible for the protection of Chapter 7 bankruptcy, the other conditions apply. The three-step calculation is as follows:

i) Step 1 - Median Income Test
ii) Step 2 - The means test calculation
iii) Step 3 - Multiply the guarantee non-priority debt by 25%

Step 1 - Median Income Test

The first step of the process is Chapter 7 to compare the debtor's current monthly income to state income of the median. "The state median income is determined for each of the 52 U.S. states from the U.S. Census Bureau, and this report is published every year. Proof of means of each individual is based on the state residence and number of dependents in the family of the debtor. The average income compared to the currently monthly income (CMI) of the debtor. If the current monthly income is less than the state median income, the assumption of abuse the system is void and the debtor qualifies for Chapter 7 protection.

So what factors are included in the calculation of monthly income today? CMI is calculated on the average monthly income from all sources during the last 6 months before filing for bankruptcy with the last calculation ends on the last day of the month prior to presentation. CMI includes the following revenues:

* Business net income (after all expenses paid)
* Interest, dividends and royalties
* Pensions and retirement income
* Gross wages (before taxes), including wages, tips, bonuses, commissions and overtime.
* Unemployment benefit is not a social security benefit
* Rental property and other income
* Receipts for alimony or spousal support

Step 2 - The means test calculation

If the chapter 7 debtor's current monthly income is greater than the state median income, then we have to calculate the step 2. The debtor's current monthly income is reduced by taking some of the standard costs, and expenses qualified personnel. Here is a list of deductions that can be made of CMI:

* The costs of childcare as a court ordered a spouse / child support payments
* Average monthly federal, state, social security, self-employment or Medicare taxes
* 401k retirement contributions, work uniforms and payments from the union
* Standard local IRS mortgage or rental costs reduced the amount of spending 60 months on average compared mortgage real
* IRS local standard for housing and utility expenses excluding mortgage (see above).
* IRS national standard for food, clothing, household items, staff costs and various other types of care.
* Telephone charges incurred to maintain the health and welfare of the debtors, including mobile phones, Internet service, call waiting, voice mail, caller ID, long distance and more.
* The costs of health insurance of debtors are not covered by a savings account for health
* The costs of education needed to maintain current employment of the debtor or a child's physical / mental dependents.
* IRS standard transport costs and leasing the property at least 60 months on average current payment of the insured vehicle