Chapter 7 Means Test For Bankruptcy - Choose Chapter 7 If You Qualify!

Perhaps you have never heard of the chapter 7 means test, but if you are considered chapter 7 bankruptcy, it's in your best interest to learn more about the new bankruptcy laws.

You'll find that not only is there a chapter 7 bankruptcy means test, but a chapter 13 means test as well.

When you file for this type of bankruptcy, often your assets end up being sold by court order and then the proceeds are sold to pay off your creditors. Before you take this step, here is a closer look at the information you need to know about a bankruptcy means test.

Passing the Chapter 7 Means Test 101

A bankruptcy means test is given to anyone filing for bankruptcy. This test is done to see whether the person filing will qualify under the rules for chapter 7 bankruptcy or chapter 13 bankruptcy. When the means test is done, here are some of the things that will be taken into account.

First, you'll find that the chapter 7 bankruptcy means test will take a look at the income you have made for the previous six months. Another thing considered is whether the average income is lower or higher than the State median income. If your income happens to be below the state median then you will probably qualify for declaring a chapter 7 bankruptcy.

Of course, if the chapter 7 bankruptcy means test is done and the results show that your income personally is larger than the State median, then there are some further tests that are going to be done on your finances.

Often calculations will be done subtracting certain expenses from your overall income, but this has to be allowed by the court. Once they get this new figure, it is multiplied by 60 months to figure out what your average income is for the following 5 years. Then it is compared against the State's median income for the next five years.

If the bankruptcy means test finds that your income is $10,000 or more above this median, then you will not qualify for chapter 7. However, a means test may then be done to see if you qualify for chapter 13 bankruptcy instead.

These steps can actually be done at home if you want to figure out if chapter 7 bankruptcy is going to be for you.

However, if you take these steps and use them on your own finances, you may come out quite close to the median. If this occurs when you take the means test, it's a good idea to get in contact with a professional who can professionally run this test for you.

Just remember, bankruptcy of any kind should be the last resort. Often there are other debt elimination methods out there that will provide better results without damaging your credit.

However, if you do come to a point that bankruptcy is your only option, consider taking a chapter 7 means test to see if this is the right option for you.

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