Bankruptcy in Maryland: Understanding the Means Test

Bankruptcy can be a daunting process, especially when navigating the specifics of your state’s regulations. In Maryland, understanding the Means Test is crucial for individuals considering Chapter 7 or Chapter 13 bankruptcy. This article provides an overview of what the Means Test entails and its implications for your bankruptcy case.

The Means Test is a standard used to determine whether an individual’s income is low enough to qualify for Chapter 7 bankruptcy. Chapter 7 allows for the discharge of most unsecured debts, which can provide significant relief for those struggling financially. However, not everyone is eligible; the Means Test serves as a filter.

To complete the Means Test in Maryland, you’ll first need to gather your financial information. This includes your current monthly income, which is calculated based on the average income of a household of your size in Maryland. The U.S. Trustee’s office periodically updates these figures, so it’s crucial to reference the most current data, which can be found on their website.

If your monthly income is below the median income for your household size, you typically qualify for Chapter 7 bankruptcy. If your income exceeds the median, you must complete additional calculations to assess your disposable income. This involves deducting allowable expenses, such as housing costs, utilities, and certain other expenses determined by the IRS.

Maryland also utilizes the ‘means-tested’ living expense standard, which allows filers to align their deductions with state-specific expenses, including costs for transportation, food, and healthcare. By accurately detailing these expenses, you can potentially lower your disposable income, increasing your chances to qualify for Chapter 7.

For those who do not qualify for Chapter 7 bankruptcy, the Means Test determination plays a vital role in filing for Chapter 13 bankruptcy. This chapter functions as a repayment plan over three to five years and requires individuals to have a stable income to make monthly payments towards their debts.

It’s important to highlight that even if you qualify for Chapter 7, not all debts may be discharged. Certain debts, such as student loans, child support, and tax obligations, typically remain after bankruptcy. Understanding the nuances of the Means Test and how it relates to your entire financial picture is essential.

In summary, understanding the Means Test is a pivotal part of navigating bankruptcy in Maryland. It determines eligibility for Chapter 7 bankruptcy by comparing your income against state medians and evaluating your disposable income. This understanding can guide you toward the best bankruptcy option for your situation, whether it’s Chapter 7 or Chapter 13.

If you’re in financial distress and considering bankruptcy, it may be beneficial to consult with a qualified bankruptcy attorney who can provide insights tailored to your specific circumstances. They can help you navigate the complexities of the Means Test and aim for the best possible outcome for your financial future.