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.