This test was designed to limit how many people are eligible for Chapter 7 bankruptcy. In short, it is only for people who are unable to pay their debts.
In an overall sense, the means test does nothing more than deducts specific expenses from your current income. The end result is your monthly disposable income. The lower your disposable income the better chance there is that you will qualify for Chapter 7 bankruptcy.
Answer these Questions
There is a lot to learn about the Chapter 7 bankruptcy means test, but there are two questions that can point you in the right direction:
- Do you earn less income than the median? If your monthly income is less than the median in your state, for a household of your size, you automatically pass the means test. At this point, you don’t have to do anything else but file for Chapter 7.
- Do you have enough disposable income to repay your debts? If your income is higher than your state’s median, your situation will become more complex. The test will determine if you have enough leftover income to pay some of your unsecured debts. In the event that your disposable income is too high, you are not eligible to file for Chapter 7 bankruptcy.
Tip: if you don’t qualify for Chapter 7 bankruptcy, don’t give up on this process altogether. You may want to consider Chapter 13. It is not the same in terms of how your debt is approached, but it can help you get your finances back in order.
Now that you have a basic understanding of the Chapter 7 bankruptcy means test, it is time to make your next move. Contact us for professional guidance. We can help you determine if you are eligible to file.