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Unemployment Compensation is Factored into the Bankruptcy Means Test

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If you are receiving unemployment, it is considered in a bankruptcy means test.

For those considering filing for personal bankruptcy, and receiving unemployment, you must provide this information to your Iowa bankruptcy lawyer. This includes all pay stubs from the past year and anything that demonstrates ownership and the value of property you own. This information is used to fill out bankruptcy forms, and that includes Form B22A, referred to as the “means test.” Overall, the Iowa bankruptcy lawyer uses your income, plus unemployment, to perform a means test.

If your income is just above the state median income parameters, you will be told whether you are eligible to file for Chapter 7 bankruptcy, after the means test results are determined. Your means test must include records of any and all income within the past six months, aside from your regular job. The means test process starts by figuring out your current monthly income and what income types are present.

For instance, there are a wide variety of income types that may include:

Salary
Tips
Wages
Bonuses
Commissions
Overtime
Real property income
Retirement income
Business income
Unemployment
Contributions to the household income

Note: Social security benefits are not included in the means test.

 

What happens next is the Iowa bankruptcy lawyer adds up all of your income and divides by six, representing your average monthly income for the six months prior to filing for bankruptcy.  This average monthly income figure is then multiplied by 12 to show your yearly income.  This is compared to the median family income across the state for a household of your size.  If the figure is above the state median, you will initially appear to be ineligible for Chapter 7 Bankruptcy, but the lawyer will take additional steps to figure out your disposable income in order to see if you could get back into a Chapter 7 category.  Disposable income figures are calculated by deducting allowable expenses from your monthly income.

The final step is to determine if the presumption of abuse may rear its head should you file for Chapter 7. In short, if your monthly disposable income is under $6,000, there is no presumption of abuse. If it is more than $10,000, abuse is presumed and you would not be eligible to file for Chapter 7 bankruptcy protection.

Each state is different when it comes to the means test, but in general, your income is figured out along those lines no matter where you live. Always discuss your situation with a skilled bankruptcy lawyer, and avoid the very real possibility that should you attempt to file on your own, you may run afoul of the hundreds of rules and regulations governing bankruptcy.

Kevin Ahrenholz is an Iowa bankruptcy lawyer and Iowa bankruptcy attorney. To contact him, visit http://www.iowachapter7.com or call 1.877.888.1766.

Posted on Thursday, April 11th, 2013 and filed under News and Press.
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