When you need to declare bankruptcy in Maryland, there are two main options available to consumers. You can file for a Chapter 7 or a Chapter 13 bankruptcy. If you meet the requirements for the means test, you can file for Chapter 7. Otherwise, you can consider Chapter 13 and other options.
Factors considered in the means test
Bankruptcy can provide a lifeline for people who need a fresh start. The means test looks at your income, expenses and assets to determine if you meet the guidelines to file for Chapter 7 bankruptcy. Chapter 7 and Chapter 13 maintain different requirements for filing, but you need to continue with the means test to find out any eligibility options.
The means test compares an individual’s average monthly income for the last several months against the current median income for the state. If the test reveals that the individual still has income left over after covering reasonable living expenses, the individual may need to file for Chapter 13 bankruptcy. When an individual makes more than the state’s median income, they must continue to fill out the entire form to account for all expenses. The means test provides a way for the state to determine if someone with a high income is trying to use bankruptcy to wipe out debts they could pay.
Getting help choosing the right bankruptcy option
Some individuals only qualify to wipe out a portion of their debt. In these cases, gaining as much information as possible about the means test and bankruptcy options offers the best course of action. Failing to improperly account for household size, Social Security benefits and other common mistakes can disqualify you inadvertently.