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What is the Bankruptcy Means Test?


In bankruptcy, the means test is a way to determine if someone is eligible for Chapter 7 protection. Passing the test is the only way an individual can file for Chapter 7 and completely discharge out all of his/her debts. Those who fail the means test may choose to file for Chapter 13 bankruptcy as an alternative, which will allow them to repay a portion of their debts, but will not cover all of the obligations.

Who is Eligible to File for Chapter 7 Bankruptcy?

The means test was designed to ensure that Chapter 7 bankruptcy was only being used by people who truly cannot pay their debts. People who pass the means test are permitted to file for Chapter 7 because their incomes are too low to cover their expenses. However, even if one’s income is not low, that person may still qualify for Chapter 7, so long as the person “passes” the means test.

How Does the Means Test Work?

The means test essentially asks two important questions to determine if a filer qualifies for Chapter 7. The first is whether the individual’s household income is greater than the median for a household of that size in his/her state. If the answer is no, then the filer automatically passes the means test, regardless of expenses. But if the answer is yes, then that person must move on to the second question: “Does the person have enough disposable income to repay any portion of his/herdebts?” This question can get a bit more complicated. Disposable income is the income left over after paying monthly expenses. So, if someone’s disposable income adds up to an amount which would allow even a portion of what is owed to be repaid, that person will undoubtedly fail the means test.

What’s the Next Step?

Whether one passes the means test or not does not limit a person from exploring other alternatives. Additionally, just because a person passes the means test and can file for Chapter 7 bankruptcy, does not mean that he or she necessarily should. Any decision to file for bankruptcy should be made only after consulting with a South Florida Bankruptcy Lawyer. The expert attorneys at Kelley Kaplan & Eller will look at all of the factors involved to help you determine your best option.

If you are considering filing for bankruptcy, call us today to find out what options are available to you.

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