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Understanding Bankruptcy Eligibility via the Means Test

Posted By Allmand Law Firm, PLLC || 18-Mar-2014

Means Test

Are You Eligible For the Bankruptcy Means Test?

When you file bankruptcy you will take what is called the Means Test. The test helps debtors learn if they qualify to file Chapter 7 bankruptcy. It reviews the financial background of the debtor to understand monthly expenses and income availability. The test reviews whether disposable income is available and whether it can be placed toward outstanding debt obligations. Each state may have an income threshold or minimum amount you can earn that helps determine eligibility upon reviewing other details about your finances.

In some cases you may be above the median income amount, but it is possible to still qualify for Chapter 7 bankruptcy. This chapter eliminates or discharges unsecured debt obligations such as personal loans, credit card bills , and medical bills. When debt is discharged the debtor no longer has financial responsibility to repay the creditor. The Means Test reviews income and expenses generally from the last six months. The information is compared to others who live in your state along with the median income amount.

Most income is included in calculations with the exception of Social Security. If your income falls under the median amount for the state you may qualify for Chapter 7. Some who may be above the median amount may still qualify for this chapter depending on other qualifications such as deductions. The debtor's finances will be reviewed to learn what disposable income is left over after paying necessary bills. Any leftover may be used to pay creditors. If no disposable income is left and they have deductions with allowable expenses, they may qualify for Chapter 7.

Categories: Bankruptcy
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