Chapter 7 Bankruptcy Means Test

Since the new bankruptcy law went into effect in October of 2005, people who want to file for Chapter 7 Bankruptcy have to pass what is known as a means test. The Chapter 7 means test is a formula applied to determine whether or not the consumer would have enough money available to make some minimal payment to creditors in a Chapter 13 Bankruptcy plan.

The Chapter 7 means test is an attempt to reserve Chapter 7 bankruptcy for those who really have no means to pay. The goal of the means test is to push those who have disposable income into Chapter 13 bankruptcy plans so that their creditors will receive at least partial payment.

The process begins by comparing your income information for the past 6 months to the median income for persons in your area. If your income is less than that amount, you are automatically qualified to file Chapter 7 bankruptcy.

If, however, your income is more than the median income for your area, then you must continue the means test to determine what the amount of your disposable income is and if it is sufficient to meet debt repayment terms.

A qualified Bankruptcy Attorney can guide you through this process and help you decide which option is best for you.

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