Clark & Washington

Understanding the Chapter 7 Means Test

In order to qualify for Chapter 7 bankruptcy, you must pass the means test. If you do not pass this test, you must look for another debt relief option.

Chapter 7 bankruptcy can help you get out from under debt by liquidating your assets, paying as much of what you owe as possible, and discharging the rest. However, not every individual will be eligible to file Chapter 7 bankruptcy.

What Is the Means Test?

The means test is a test designed to determine whether your income is low enough to file for Chapter 7 bankruptcy. The purpose of the means test is to prevent people who earn large amounts of income from using Chapter 7 to their advantage. The exact requirements for passing the means test will vary based on your household size and the amount of your allowable expenses.

How Does It Work?

The first step of the means test simply involves determining whether your income exceeds the median income for a household of your size within your state. If your income does not exceed this amount, you have passed the test. If your income is higher than this median, you must move on to the next step in the test.

The second step in the means test involves determining whether you have enough disposable income to pay your debts after you have paid certain allowable monthly expenses. If you have too much income left over after your allowable expenses have been subtracted, you will fail the means test and will be unable to file Chapter 7 bankruptcy. However, other bankruptcy options may still be available. For example, you may be able to file Chapter 13 bankruptcy instead.

Getting Professional Assistance

The process of filing for Chapter 7 bankruptcy can be difficult and confusing. If you are thinking about filing for Chapter 7 bankruptcy, or if you would simply like to explore your options for getting out of debt through bankruptcy, you need to consult an experienced bankruptcy attorney. A bankruptcy attorney can review your financial situation, explain your options in detail, and help you decide how you should proceed. If you decide to file bankruptcy, your bankruptcy attorney can also guide you through each phase of the process.

At Clark & Washington, LLC, we have helped countless clients eliminate their debts in bankruptcy. Please contact us today to schedule a consultation.

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