The Means Test And You

Do you qualify to file for Chapter 7 bankruptcy?

One of the most common concerns our clients have is over the issue of filing for Chapter 7 or Chapter 13 bankruptcy. While both filings have their benefits for the struggling debtor, Chapter 7 is undeniably more popular by sheer statistics. In 2011, more than a million Americans filed for Chapter 7 debt liquidation, nearly double the number of Chapter 13 debt reorganization filings.

Part of the reason for the popularity of Chapter 7 is its simplicity. The entire process usually takes no more than a few months, in contrast to Chapter 13 bankruptcy, which almost always takes multiple years to complete. Chapter 7 also allows clients with few future prospects and assets to wipe away a large amount of debt quickly and relatively painlessly. For this reason especially, recent regulations have been enacted to limit the number of Chapter 7 filings.

The primary restriction placed on Chapter 7 debt relief filings is what is known as the "means test." This is a government-mandated regulation, which forces clients seeking to file for liquidation to undergo a review of their finances in order to determine eligibility. If the client fails the means test, he or she must seek a different form of debt relief instead.

The first step in completing the means test is a review of your annual income. You will be required to submit your finances to examination by the courts. This information is used to determine your average yearly income, which is then compared to the median income for a person or household in your area. If you fall in the lower half of all incomes, you have passed the means test and will be allowed to file under Chapter 7!

Should your annual income fall in the upper half of local incomes, however, you must undergo a second step to determine eligibility. The court-appointed trustee will examine your finances again, this time attempting to discern your level of disposable income. The exact calculation will vary from state to state, and even court to court. This number is then compared to a set figure, legally defined as the cut-off point for eligibility, which will again vary by location.

A Bankruptcy Attorney You Can Rely On

If all else fails, you may be required to seek debt consolidation under Chapter 13. Do not despair, however! Many Americans find that filing for either form of bankruptcy allows them to start a new lease on life! With the help of the legal team at Price Law Group, you can challenge your creditors and beat your debt. We urge you to visit our website and speak with a trained professional before making any decisions regarding your financial future. Please, seek help from an experienced lawyer at our firm before it is too late.