FILING FOR CHAPTER 7

AND THE MEANS TEST

When choosing to file for Chapter 7 Bankruptcy, you’ll need to take a Means Test in order to decipher if your income is low enough to qualify for Chapter 7.

If someone with a higher income attempts to file and is rejected, he or she may file for Chapter 13 instead. Filing for Chapter 13 may allow these filers to to repay a part of their debts, but they may not completely make their debts disappear under Chapter 7.

The intention of the test is to limit Chapter 7 Bankruptcy filings to those who cannot positively not pay off their debts. Basically, the test will take your average monthly income and subtract your expenses in order to find your disposable income. If your disposable income is high, then the less likely you will be to qualify for Chapter 7.

More than likely, only filers with mainly consumer debts rather than business debts need to concern themselves with the means test. Before taking the test, figure out whether or not the income you have is more or less than your state’s median income.

The test becomes much more complicated if your income amount is greater than the state’s average. If you calculate that your amount of disposable income will be enough to pay some of your debts, than there’s a high chance that you will fail the Means Test.