Every year, the State of Colorado calculates the average income for an individual and multiple person family. This average is used to determine which type of bankruptcy may be appropriate to file. As of April 1, 2017 the following median incomes apply:
If you have five or more people in your household, then you add $8,400 for each person in excess of four.
How Does the Means Test Work in an Aurora Bankruptcy?
Basically, a state’s average income is used to determine if you qualify for a Chapter 7 bankruptcy, a Chapter 13 bankruptcy with a 3-year payment plan, or a Chapter 13 bankruptcy with a 5-year payment plan. The way it works is this: your income is compared to the median based on the number of people in your household. If your income falls below the average, then you will probably qualify for a Chapter 7 bankruptcy or a Chapter 13 bankruptcy with a 3-year payment plan. If you make more than the median income, you may have to file a Chapter 13 bankruptcy with the 5-year payment plan. However, the law is complicated and there are always special circumstances that may apply to you and give exceptions to the above guidelines. This is why you should consult with an experienced Aurora bankruptcy attorney before making any bankruptcy filing decisions.
Using the Means Test to Determine Your Chapter 13 Repayment Plan Amount
If your income exceeds the median provided in the means test, then you may have to petition the court for a Chapter 13 bankruptcy, which includes a repayment plan. In order to determine what your repayment plan amount will be for your Chapter 13 bankruptcy you will need information about your income and expenses. Your income amount must include all forms of income including, employment salary, income received through rentals, retirement, pensions, and unemployment. After you gather this information, then you subtract the appropriate expenses Colorado has identified (like rent, groceries, etc.). This will give you the amount the state will see as available to pay back creditors under your Chapter 13 repayment plan.
If you have questions about the Means Test and which type of bankruptcy you should file, contact bankruptcy attorney Barry Arrington for a free initial consultation at 303-205-7870 to begin your journey to financial freedom.