Bankruptcy Laws Regarding Chapter 7 Means Test
It is inevitable if you are considering filing bankruptcy that you will hear about the Means Test. Before the bankruptcy laws were changed, a person who wanted to file for bankruptcy could file for a Chapter 7 or Chapter 13 based on their preference. However, under the new laws, the first step in determining if you can file for Chapter 7 bankruptcy is the amount of income you make. It is a measurement of your current monthly income against the median income for a household of your size in your state. If your income is less than or equal to the median, you can file for Chapter 7 bankruptcy. If it is more than the median, however, you must pass the Means Test in order to file for Chapter 7.
The purpose of the means test is to figure out whether you have enough disposable income, after subtracting certain allowed expenses and required debt payments, to make payments on a Chapter 13 plan. To find out whether you pass the means test, you subtract certain allowed expenses and debt payments from your current monthly income. If the income that’s left over after these calculations is below a certain amount, you can file for Chapter 7. IF you do not pass the Means Test, you’re unable to file for Chapter 7 bankruptcy, where your debts are discharged, and you may have to file a Chapter 13 bankruptcy where you will have to come up with a payment plan. Visit us to find a bankruptcy lawyer by state.
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