Reasonable and Allowable Expenses are Typically Calculated by Way of a Means Test Indicates Iowa Bankruptcy Lawyer

Des Moines, IA (Law Firm Newswire) January 20, 2012 – The means test for those facing bankruptcy is no great mystery. Luckily, it does take reasonable living expenses into account.

The vast majority of those who file for bankruptcy in the U.S. today will file Chapter 7 largely because that is the quickest route to becoming debt free in a reasonably short period of time. Those who file Chapter 7 give up their property to pay back their debts. “This property is not exempt and to find out what falls in this category, a debtor needs to consult a skilled Iowa bankruptcy lawyer,” said Kevin Ahrenholz, a Des Moines bankruptcy attorney in Iowa.

Exemptions are, generally speaking, an individual’s home, furniture, car or other possessions the person requires to carry on with a normal household. The debtor only gives up non exempt property and usually when all the right exemptions are taken into consideration, there is not much left. This means just about all of the property stands a good chance of being exempt.

There is another thing going on in the background that many facing bankruptcy do not realize, and that is the courts do recognize reasonable and allowable expenses that a person needs to live on. This typically results in the means test, which simply measures how much of a person’s income they can keep to pay for their living expenses.

Reasonable expenses may include, but are not necessarily limited to:
• Housing costs (mortgage or rent)
• Utilities
• Health insurance
• Pension contributions
• Disability insurance
• Supporting dependent children under 18-years-old
• Caring for sick or elderly family members

The means test has two parts with the first part relating to finding out if a debtor can afford to pay back unsecured debts like medical expenses or credit card debt. Part two relates to how a person’s income compares to the average income in the state where they live. If a debtor’s income is above the state average, and they can conceivably pay at least 25 percent of the unsecured debt, they will not qualify for a Chapter 7 bankruptcy. Instead, they would typically file under Chapter 13.

There are some exceptions, which mainly relate to whether the debtor is an active duty military member. When in doubt, call an experienced Iowa bankruptcy lawyer.

Kevin Ahrenholz is an Iowa bankruptcy lawyer and Iowa bankruptcy attorney. To contact an Iowa bankruptcy attorney, Iowa bankruptcy lawyer, or set up an appointment, visit http://www.iowachapter7.com or call 1.877.888.1766.

Kevin Ahrenholz
309 Court Ave., Suite 805
Des Moines, IA 50309
1.877.888.1766
Offices in Des Moines, Cedar Rapids, Waterloo, Mason City, and Vinton.

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