What is the Bankruptcy Means Test?
The purpose of the bankruptcy means test is to determine if your income level is low enough for you to file for Chapter 7 debt relief, or if you can file a Chapter 13 bankruptcy with less than a five-year repayment plan. If your income is above the median family income, you may not be able to file a Chapter 7 bankruptcy.
Ideally, this law prevents people from skipping out on paying debts when they likely have the income to do so. However, filling out the form incorrectly can lead to being denied a Chapter 7 filing.
Do I Have to Take the Test?
You might be eligible for chapter 7 filing without having to take the test. If your household income is less than or equal to the median income in your state for a household your size, you can file chapter 7 bankruptcy.
What’s On the Test?
If you love preparing your taxes, you’ll love the bankruptcy means test. It’s essentially a balance sheet of all the money you have coming in minus allowable expenses and debts owed. If the disposable income left over falls below a certain amount, you can still file for chapter 7. Otherwise, you’ll file for chapter 13.
The Law Office of Larry Karandreas assists clients with preparing required bankruptcy paperwork, including the means test where applicable.