What To Know About Bankruptcy Means Testing

Do you think that you do not qualify for bankruptcy because you make too much money? That's where means testing comes into play. It's a way to determine if you are able to pay back creditors, or if you can utilize a Chapter 7 bankruptcy and get that fresh start that you need. Here are a few questions you are likely to have about means testing.

What Are The Two Parts Of Means Testing?

Means testing is performed in two parts to figure out if you can repay debts. The first part involves looking at how much money you make and comparing that to others based on where you live. This is done by looking at the median income over the past six months of you and similar families in your area. If you're below the median income where you live, then you will qualify for Chapter 7 bankruptcy. This is done so that a family of four is not compared to a family of two in terms of their income.

However, those that have income above the median household income will need to qualify through a different method. The second form of means testing is to look at how much disposable income you have after paying existing expenses and debts. You can qualify for Chapter 7 bankruptcy if your disposable income is small enough based on this information.

Can You Do Means Testing On Your Own?

It is possible to see if you qualify for means testing based on the first part of the means test. The information for your state is located online, and it's a quick way to determine if you qualify for Chapter 7 without doing much work. If you qualify, you should reach out to a bankruptcy lawyer in your area to help get the process started for you. The second part of the test is a bit difficult to figure out on your own without filling out the necessary paperwork, since there are expenses that do and do not count to determine your disposable income. 

What Happens If You Don't Qualify For Chapter 7 Through Means Testing?

The purpose of means testing is to determine if you qualify for Chapter 7 bankruptcy, which discharges your debts so that you do not owe anything. Your next option will be to use Chapter 13 bankruptcy, which uses a repayment plan to pay back creditors a portion of the debt that you owe to them. Since this requires having more disposable income, your repayment plan will be based on how much money you have left over at the end of the month. 

Contact a bankruptcy law firm in your area to learn more.

About Me

Goodbye Bad Debt. Hello Good Life.

Debt is not always your fault. Sometimes something unexpected happens, like job loss or a bad illness, and the bills just pile up faster than you're able to handle. Eventually things settle down and you think your life is back on track again, but you still find yourself unable to pay those sky-high bills. Declaring bankruptcy is usually an option. It can help you move on, not only financially, but mentally. There are several types of bankruptcy that are allowed under U.S. law, and you'll need to meet with a bankruptcy attorney to find out which one you are most likely to qualify for. We share more information about this and related bankruptcy attorney topics on this website, so dig right in and start reading.



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