Bankruptcy and the Bankruptcy Means Test
The bankruptcy Means Test was a qualification standard adopted by Congress in 2005 for bankruptcy filers. It essentially determines whether you qualify for a bankruptcy liquidation, better known as a Chapter 7 bankruptcy. If you do not qualify for a Chapter 7 bankruptcy, the Means Test establishes the amount of your debt you must repay though a debt reorganization, most commonly a Chapter 13 bankruptcy.
The Means Test was established by the Department of Justice. Here is a link to their site. The Means Test is not difficult to apply, though it can be complex if you have higher income or your personal finances themselves are complex.
Even if your income is above the Means Test limit, you may still qualify for a Chapter 7 bankruptcy liquidation. Expenses are taken into consideration and, if higher than the norm, they may offset your income allowing you to qualify. There are other factors, too, that impact the figures for the Means Test. Suffice it to say, there is a lot that goes into the Means Test.
And even if you do not qualify for a Chapter 7 bankruptcy under the Means Test, you can still qualify for filing bankruptcy under a Chapter 13 bankruptcy reorganization. This means you have to pay back a portion of your debts; but it also means that whatever portion of debt you don’t repay is discharged.
Sometimes, too, there are benefits to filing a Chapter 13 bankruptcy to reorganize your debt. Since you repaying a portion of your debt in a Chapter 13 bankruptcy, the government provides incentives to guide you in this direction. Many of the benefits of filing for Chapter 13 are found throughout this website.
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Perhaps this aspect of bankruptcy is most needy of professional guidance. If you are considering bankruptcy, find out where you stand by scheduling a free consultation. It’s more than worth the price.