Basically, low income households are defined as those whose incomes are less than 80% of the area’s median family income. Meanwhile, families with very low incomes are those whose salaries are less than half of the area’s median family income.
Reporting incorrect income: In order to provide your most accurate annual income, you must include your average monthly income for the six months leading up to your filing. More specifically, you’ll use the entire six months prior to your filing date, which ends on the last day of the calendar month. Double this number and compare it to Kentucky’s median income of $26,653 for individuals or $50,589 for households.
Including any Social Security benefits: It’s important to not include any Social Security benefits as part of your income on the means test. If you include it, your median income may be too high and you won’t qualify for Chapter 7 as a result.
Not reporting your spouse’s income: If you’re married and you’re filing for bankruptcy but your spouse isn’t, you still need to report their income especially if you both share a household. Including someone else’s income can make it harder to pass the means test, but you can still leave out parts of your spouse’s income that aren’t used for household items. You can do this in the marital adjustment deduction section of the means test. Other portions of your spouse’s income that you can exclude are student loan payments, withholding taxes, and prior support obligations.
Reporting taxes incorrectly: Many bankrupt people unintentionally report their taxes incorrectly on the means test. They do this by utilizing the amounts withheld from their paychecks each month to calculate income tax expenses on the means test. However, under the means test, you can only deduct your actual tax due. If you receive a significant tax refund each year, your withholdings may be overestimating your tax deduction.
Chapter 11 is a good option for large businesses, small businesses, or those involved in business partnerships. The entire Chapter 11 process can take between six months and two years to complete. You or your business may be a good candidate for Chapter 11 if:
Chapter 13 bankruptcy is also a good option for individuals and small business owners who don’t qualify for Chapter 7. However, Chapter 13 generally takes longer to complete compared to Chapter 11. The expected timeline for Chapter 13 is three to five years. Chapter 13 may be the right option for you or your small business if:
If you happen to fail the Chapter 7 means test, you could still qualify for Chapter 11 or Chapter 13. These types of bankruptcy have benefits that Chapter 7 doesn’t, including: