Friday, January 13, 2017

What Is The Bankruptcy Means Test?

When you file bankruptcy, one of the first steps is to have your attorney perform a required mathematical computation. This computation is referred to as the means test, and was one of the major chances to the Bankruptcy Code when Congress made revisions in 2005. The result of your means test will determine whether you can file a Chapter 7, or a Chapter 13 bankruptcy. The test takes into consideration your total income as well as your total secured debt. For people with more secured debt, in relation to their income, Chapter 7 is a possibility. But if you have any money left over after paying your secured obligations, the law requires you to file a Chapter 13 and put that disposable income towards repayment of at least a portion of your unsecured debt.

The purpose of implementing this test was to require those that can pay some of their unsecured debt to do so when filing bankruptcy. Some additional information that is helpful to know about the means test includes:
         The income figure is taken by avera
ging your last 6 months of wages, prior to filing a bankruptcy case. This includes all regular wages as well as any bonuses or increases you have received recently.
         The test includes a demographic specific element as well, meaning different parts of the country have different requirements as to what ratio of secured debt to income will allow you to file a Chapter 7.
Most people prefer to file a Chapter 7, because it is shorter and allows you to discharge all of your unsecured debt. But if the means test result shows that you are only eligible to file a Chapter 13, you will still get the relief you need from overwhelming debt. Both chapters of bankruptcy allow consumer debtors to eliminate debt, or at least significantly reduce the balances owed. If you have questions about how the means test works, or need additional information about how bankruptcy can help you get out of debt, we have answers. Call today to talk with one of our experienced bankruptcy and debt management attorneys, and let us help put you on the road to financial recovery.

If you have more questions about bankruptcy and the means test, contact us today at We will help you get prepared for what comes after we file your case, and have multiple locations where we schedule appointments.

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