A bankruptcy means test is a test that determines whether your income is low enough for you to qualify for a Chapter 7 bankruptcy. In other words, if your income is too high you may file for a Chapter 13 bankruptcy.The reason a bankruptcy means test exists is to limit the filing of a Chapter 7 bankruptcy to those who truly cannot pay their debts.
A bankruptcy means test is calculated by deducting your monthly expenses from your monthly income, leaving you with what is known as your disposable income. The higher your disposable income, your eligibility for filing a Chapter 7 bankruptcy is less likely. Something to keep in mind is, only filers with primarily consumer debt vs. business debt are required to take the bankruptcy means test and a question you need to ask yourself before taking the bankruptcy means test is first determining whether your median income is more or less than the median income of your state.
Median incomes vary from state to state but you may do the math easily with the help of an online calculator If you learn that you make more than the median income of your state you must determine whether, after subtracting certain expenses, you would have enough to repay some of your debt. If your median income is less than the average of your state you do not need to proceed with the rest of the bankruptcy means test, you qualify immediately for a Chapter 7 bankruptcy.
If you are someone who does not pass the bankruptcy means test then as I mentioned before you are left with the Chapter 13 which requires you to make monthly payments over a three to five year period strictly monitored by the court whereas a Chapter 7 does not require any repayment. If you have any questions about your bankruptcy eligibility contact us. We are here to help!
