To make the Means Test simple to understand when considering a Chapter 7 Liquidation or Chapter 13 Payment Plan Bankruptcy, just ask yourself if you have any income left over after expenses at the end of the month. Let's face it, if you had any income to spare, you probably wouldn't be thinking of bankruptcy in the first place. Contrary to popular belief, the Means Test is more than just comparing yourself to the average income in your state, and hoping you fall below that average to qualify for Bankruptcy protection.
Many people in Los Angeles still qualify for a Chapter 7 Bankruptcy, even when their income is higher than most other people. This is because many people are strapped into a bloated Mortgage Payment, which counts as a valid expense for the means test, so it gets subtracted from that higher income. If you don't have more than you pay at the end of the month and your expenses are not extraordinary, other than a high mortgage, you can still pass the Means Test. In other words, just because you have decent income and live in the Los Angeles area does not mean that bankrutpcy protection cannot be there to give you a fresh start.
It is also important to categorize your debt to see if it is secured or unsecured, and how much you really owe on each asset. If you actually have substantial equity in your home, this can work against you as your exemption may not protect that full amount and the Trustee can force the sale of your home to pay creditors. The upside is that if you have little to no equity, your ability to stay in the home is actually greater, and you may be able to utilize generous exemptions in other areas as a California resident.
As a Los Angeles Bankruptcy Attorney, I can guide you through the pitfalls so that you can protect your property through various exemptions. Be wary of professional form preparers and high volume Bankruptcy Mills, as it takes more than a passing glance to see if Bankruptcy is the right option for you.
-Kirk Laron
