Written by Attorney Karra Kingston.
Updated August 17, 2020
If your credit card bills keep piling up every month then you may be thinking about filing an Arkansas bankruptcy. Filing a Chapter 7 bankruptcy is a good way to get back on the right path and help you start over! In 2005 Congress reformed the Bankruptcy Code because they were worried that too many people who could afford to pay their bills were filing for Chapter 7 bankruptcy. To address this, Congress created the Means Test, creating an extra step when filing for bankruptcy. The so-called Chapter 7 Means Test has two parts. First, if you can show that your total current monthly income is less than the median income in Arkansas for a family of the same size, you are immediately qualified to file a Chapter 7 case. You can calculate your “current monthly income” by taking all of your income for the past 6 months, adding it all up, then dividing it by six to get your average current monthly income. If your monthly family income is more than the median income in Arkansas, you will have to go to the second part of the bankruptcy Means Test in Arkansas. The second part of the test compares your reasonable monthly expenses against your income to see if there is any disposable income left at the end of the month. If you have nothing (or very little) left at the end of the month based on the bankruptcy Means Test in Arkansas, then you qualify for Chapter 7 relief. If you still don’t qualify, you will have to look into filing a Chapter 13 bankruptcy.
Arkansas Median Income Levels
Arkansas Median Income Standards for Means Test for Cases Filed On or After May 1, 2020
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Discharge in Bankruptcy for Arkansas
The discharge is the desired end of every Arkansas bankruptcy case. A discharge officially allows you to walk away from the debts listed in your paperwork. This means that creditors are no longer able to pursue collection efforts against you. It’s important to keep in mind that some debts are non-dischargeable (such as student loans and recent tax debt) but most credit cards are unsecured and will be discharged. Once you have completed all of the necessary paperwork, took both credit counseling classes, and attended your 341 meeting, your Arkansas bankruptcy discharge will be granted. The Court normally issues a discharge approximately 60 days after your first 341 meeting. After your Arkansas bankruptcy discharge is granted, the Court will close your case a short period of time later, assuming it is a no-asset case. A discharge is not an automatic right so you must take the proper steps to make sure you get your discharge. Proper steps include being honest, filing out all of the correct paperwork, attending your hearing and cooperating with your Trustee. The Bankruptcy Court can deny your discharge for many reasons, so it’s crucial that you complete each step correctly and on time.
Arkansas Means Test Calculator
In order to qualify for an Arkansas bankruptcy under Chapter 7 of the Bankruptcy Code you will have to complete the Chapter 7 Means Test. Qualifying under the Means Test is crucial because, if you don’t qualify you can’t move forward with your Chapter 7 case. To help you determine if you qualify you can use a Means Test calculator. If you search for a Means Test calculator in your web browser, you will find many different ones. Unfortunately, not all online Means Test calculators are updated as regularly as needed. If you accidentally rely on old information you may not qualify. Luckily, Upsolve provides a Means Test calculator that is kept current to the day for Arkansas. This Arkansas Means Test calculator will give you the best chance of passing the Chapter 7 Means Test by walking you through all of the reasonable expenses you can include to show that your money is already going as far as it can. Upsolve can also help with all other aspects of filing your Chapter 7 case, including the preparation of all of the bankruptcy forms you will need for your Arkansas bankruptcy case.
What Happens If I Fail The Means Test for Arkansas
If you fail the Chapter 7 Means Test because of your current monthly income and monthly expenses, it’s worthwhile to take another look at both. A simple mistake can throw calculations off completely. If, after reviewing your numbers, you still don’t qualify you may want to ask yourself if your financial circumstances are going to change in the near future.
If you work in a seasonal industry, you may want to wait to file until right before your busy season. The Chapter 7 Means Test always looks back over the last 6 months, so if you just got done with busy season, your income is going to look much higher than it will in a couple of months. If your family size changes, due to a separation or a new child, you may be able to qualify in the future. To learn more about the process of filing bankruptcy in Arkansas please see the Arkansas Bankruptcy Guide. If none of these options work for you then you may want to talk to a local bankruptcy attorney about your issues with the bankruptcy Means Test in Arkansas and explore a Chapter 13 case as a possible alternative.