3 Common Means Test Mistakes
Taking the means test is the common starting point for the two most common types of bankruptcies individuals file. However, it’s also the place where most people make mistakes, negatively affecting their chances of a successful process. The best way to avoid the common pitfalls is to hire renowned bankruptcy lawyers in Rancho Bernardo, CA and allow them to help you. However, it doesn’t’ hurt to learn more about the mistakes either.
What mistakes should I avoid making on my means test?
All the details concerning the means test and properly passing it can quickly get very complicated and very confusing for the uninitiated individuals. That’s why it’s important to learn more about the most common mistakes people make with the means test when filing bankruptcy and knowing how to avoid them:
Wrong household size
One of the requirements within the means test is to state the correct size of your household. However, this is also the single most common mistake the majority of applicants make when attempting to complete their means test.
The size of your household has a significant effect on the results of your means test, as this determines the median household income as well as the amount of deductions you’ll receive for your housing expenses.
To prevent this mistake from occurring it’s a good idea to first determine whether the residents within your household are financially dependent on yourself. For example, if you have a grandmother living with you and doesn’t pay for rent, they’re a household member since you’re essentially providing for her as well. However, a cousin using your spare room and paying rent isn’t a household member.
The income you state in your means test is extremely important since it determines the eligibility for different bankruptcy chapters. This is why you have to ensure that you’re stating your correct income and that it precisely matches the income documentation you’re submitting within your means test. Take the time to go over your documentation for the prior six months and use your tax returns as income reference. However, also note that you don’t have to include all of your income in your means test, so be careful to properly examine the rules.
Finally, make sure to list only the income you’re receiving and not one you’re not. For example, if you’re not currently receiving child support you should, you won’t list it as an income on your means test. The same goes for your expenses – you cannot list spousal or child support if you’re not paying it.
Finally, make sure to pay attention to properly listing your deductible and nondeductible expenses. For example, college expenses for your children, 401K, retirement savings contributions, and 401K loan repayments are examples of nondeductible expenses. On the other hand, expenses regarding your own education are deductible. This is another important aspect to pay attention to when filling out your means test.
Which dedicated bankruptcy lawyers in Rancho Bernardo CA can help with my means test?
Passing your means test is one of the most important aspects of filing for bankruptcy, whether you decide to file Chapter 7 or Chapter 13 bankruptcy. However, knowing which mistakes to avoid on your means test should not be your sole focus of preparation. You also need to pay attention to the different types of debts bankruptcy can help you with as soon as you become aware of the first signs it’s time for you to file bankruptcy.
There’s still one more crucial step though, and that’s hiring reputable bankruptcy attorneys to help you through it all. Lucky for you, you can always rely on Chang & Diamond, the leaders in bankruptcy law across San Diego and other nearby areas, inducing Rancho Bernardo. We’re here to provide expert counsel and representation through all the stages of your bankruptcy process. Reach out to us today and ensure a smooth transition.