Understanding Maryland’s Bankruptcy Means Test

Understanding Maryland’s Bankruptcy Means Test is essential for anyone considering filing for bankruptcy. The Means Test is a tool used to determine whether an individual qualifies for Chapter 7 bankruptcy or if they must file for Chapter 13 bankruptcy instead. This test evaluates your income, expenses, and overall financial situation, establishing eligibility criteria outlined by federal bankruptcy laws.

In Maryland, the first step of the Means Test involves assessing your household income over the six months preceding your bankruptcy filing. This income includes wages, salaries, bonuses, rental income, and any other sources of income. The total is then compared to the median income for a Maryland household of your size.

If your income is less than the state median, you automatically qualify for Chapter 7 bankruptcy. However, if your income exceeds the median, you'll need to proceed to the second part of the Means Test, which involves calculating your allowable expenses.

The allowable expenses consist of necessary expenditures for food, housing, transportation, and healthcare, among others. In Maryland, these expenses are often determined by the IRS standards, which provide guidelines on what constitutes necessary spending. After subtracting your allowable expenses from your income, if you have little to no disposable income left, you may still qualify for Chapter 7 bankruptcy.

Conversely, if you have sufficient disposable income, you may be required to file for Chapter 13 bankruptcy. This type of bankruptcy involves creating a repayment plan to pay back creditors over time, usually spanning three to five years. It’s important to note that Chapter 13 can provide additional benefits like protecting your assets while allowing you to catch up on past-due payments.

Understanding how to navigate the Means Test in Maryland can be complicated, and many people benefit from consulting with a bankruptcy attorney. A legal expert can help you accurately calculate your income and expenses and guide you through the process of filing for bankruptcy. This professional advice can be crucial, as mistakes in the Means Test can lead to disqualification or delays in your filing.

In conclusion, the Maryland Bankruptcy Means Test plays a pivotal role in the bankruptcy process, determining your eligibility for Chapter 7 or Chapter 13 bankruptcy. By familiarizing yourself with the test's components, you can make informed decisions about your financial future and explore the best options available to alleviate your debt burden.