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Bankruptcy Planning and Using the Means Test for Better Results

Personal bankruptcy under Chapter 13 is a very popular way to save homes and vehicles. This is because past due payments can be included in the plan. However, there are many other unique benefits available under this chapter. The secret to using Chapter 13 effectively, and getting the most from it, is planning. Careful and thoughtful planning is crucial.

Bankruptcy planning was once a privilege reserved for wealthy individuals and large corporations. Over time, your options changed dramatically. The means test is mandatory in all consumer cases filed today. This test determines if a person qualifies for chapter 7. It also determines the amount of payments in Chapter 13 cases. People who delay planning often miss their best opportunities unfortunately. When this happens, the remaining options are often disappointing. Careful planning is now affordable and a is essential for all people who file.

When planning correctly, a few weeks or months in advance, individuals who file Chapter 13 may keep their homes, cars and furniture. They may keep retirement accounts. They may stop home foreclosure, repossession and all collectors. Even student loans, secondary real estate loans child support payments sometimes appear in plans. Even then, with all of these benefits, you can lower Chapter 13 payments and get an even better deal.

Chapter 13 and How to Reduce Monthly Payments

Chapter 13 Payments
Reduce Chapter 13 Payments by Optimizing the Means Test

Chapter 13 payments are the cornerstone of this type of bankruptcy. At the time of filing, debtors must propose a repayment plan and specify themselves the amount of Chapter 13 payments. In a good plan, the most important debts receive a priority in the payment order. These important debts include past due home payments, past due mortgage payments for other real estate and student loan installments. You may even include past due taxes owed to the IRS and other government authorities.

Once the court confirms a plan, all past due payments are considered as if current. This prevents creditors, including the IRS, from seizing or repossessing property. It also prevents all other bill collectors from calling and threatening families at home.

The means test uses past income and some actual expenses to determine the amount of payments required by a plan. This scheme of calculation also uses national and local standards for many living expenses. In theory at least, the test estimates future income, subtracts a modest living allowance and requires payment of all remaining funds to the court. However, there is a catch.

Most plans do not repay all creditors 100% of the outstanding debt. In particular, unsecured creditors such as credit card companies often receive less than 10% of the money owed. Over the life of a plan, all of your important debts receive first payment. At the end of a plan, debtors receive a discharge of remaining unsecured debts similar to a Chapter 7 discharge. It is easy to see now that reducing payments is in the best interest of all debtors who file. If you pay a little or if you pay a lot, the end result is the same.

They key for reducing payments is to begin planning as far in advance as you can. This way, you can change your personal means test results significantly.

How to Lower Your Personal Payments with the Means Test

In order to lower monthly payments, you must make small changes in the way you spend money. This is because some of your actual, basic living expenses are included in the test calculation and some are not. This may seem illogical, and it is, but the law sets limits on how much you may spend on certain basic living expenses. Some of these allowances are far less than you may now imagine.

The best way to optimize the Chapter 13 means test is to understand how it works. The official form, B 22A, is very complicated and often uses legal terminology that is difficult for most people to understand. This is why few non-lawyers get it right when using this form at home. For a much better result, consider using a consumer-friendly approach to find out your true test results. You will know what to do and those things you must avoid.

The Bankruptcy Strategies Manual contains user-friendly forms, simple instructions, exhaustive explanations and examples plus quite a few tips for saving even more money. This guide provides all of the necessary information and tools you need to lower payments dramatically.

Compare All Available Options before Making a Decision

Bankruptcy Options
The Means Test and Your Bankruptcy Options Change Daily

Planning bankruptcy strategies is essential to guarantee an acceptable result. Too many people procrastinate only to be disappointed when eventually talking to a lawyer. If you only have a week to prepare, you will be disappointed. You will be disappointed because of the money you must waste and the meager monthly budget imposed by the court.

Your personal means test result is always changing. In fact, it changes each day as you spend your current monthly budget. Small changes today alter Chapter 13 payments for years. A payment reduction of only $200 a month is worth an extra $12,000 in your pocket over the life of a five-year plan. Is this free benefit worth a few hours today to become familiar with your options?

Be sure to plan early and thoroughly. Calculate your means test and learn to improve your results. Find out what you can do, legally, thoughtfully, and intentionally, to help yourself and the ones you love. You really can make your fresh start much more rewarding and satisfying. It takes so little effort and offers great rewards.

If you are interested, visit our home page for more information. You will learn how to compare all of your options before being forced into a decision.