In 2005, lawmakers passed the Bankruptcy Abuse Prevention & Consumer
Protection Act (BAPCPA) and made several significant changes to U.S. bankruptcy
laws. BAPCPA affected both consumer and business bankruptcies by creating
a new test to determine who is capable of paying back what they owe, and
what bankruptcy chapter they are eligible to file under.
Today, any person who chooses to file for bankruptcy must first take the bankruptcy means test. This income-based test will evaluate a person’s financial situation in order to determine if they can file for Chapter 7 or Chapter 13 bankruptcy.
The means test primarily exists to limit the use of Chapter 7 bankruptcy
to only consumers and businesses that need it most. The means test will
work by analyzing your monthly income and disposable income and determining
if you have the means to pay back your debts.
- Monthly Income – The means tests compares your monthly income to the median monthly income
in Texas. If your income is less than the state’s median income,
you qualify for Chapter 7 bankruptcy. If your income is more, your disposable
income will be evaluated to determine if you have the resources to make
payments on your debts.
- Disposable Income – Your disposable income includes any funds leftover after paying monthly
expenses. If you don’t have enough disposable income to make monthly
payments toward your debt – according to the means test – you qualify
for Chapter 7 bankruptcy. If you do have the money to make payments, however,
you will likely have to file under Chapter 13 bankruptcy.
The means test is only one component of the bankruptcy and debt relief process our attorneys
at Allmand Law Firm, PLLC can help you understand. Our lawyers understand
that every client and financial situation is unique, and we take the time
to help each client choose the path that is best for them.
If you have questions about gaining control of your finances and which
Chapter of bankruptcy you may be eligible to file under,
contact our firm for a FREE financial empowerment session. Our bankruptcy lawyers serve
clients in Dallas and Fort Worth.