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Understanding the bankruptcy means test

On Behalf of | Jan 21, 2018 | Chapter 7 Bankruptcy

Residents in Tennessee who are considering filing for bankruptcy should educate themselves about the process as part of determining whether or not a Chapter 7 bankruptcy really is the right option for them. One of the steps that people pursuing bankruptcy must complete is to take what is called the means test. 

As explained by Nerd Wallet, the means test is a way of the courts identifying who does and who does not meet the qualifications for filing bankruptcy. Simply put, courts do not want people who are in their eyes legitimately able to repay debts walking away from them. Instead they want to retain bankruptcy as a valid route for those consumers who truly have no other options for how to get out from under their pile of debt.

For some people, passing this test is as simple as having an income lower that their state’s median income. For consumers who have an income beyond this level, additional information will be required to be presented to the courts.

According to the U.S. Courts, consumers in this situation will need to provide a range of detail to the courts including not only their income but their living expenses and all debts. Bankruptcy courts acknowledge what they refer to as allowable expenses meaning a certain amount of money is expected to go toward basic things likes rent or a mortgage, transportation, food, utilities and more. All of these must be presented so that the court can evaluate how much money, if any, the consumer has left over that may reasonably be able to be used to repay debt.




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