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Does a failed means test mean Chapter 7 is off the table?

On Behalf of | Jan 4, 2019 | Uncategorized

There are very specific income requirements that you must meet if you wish to pursue a Chapter 7 bankruptcy. To figure out if you meet those income requirements, you can take something called a means test.

The means test is a pretty simple form. It is not something to stress over. You will not receive a grade on your results. It is just an income comparison.

Means test basics

In order to qualify for a Chapter 7 filing, your income level has to be lower than the state of Tennessee’s current median income level. The basic means test form just brings this information together in one place to allow you to see where you stand. So, if you take the means test and your income level falls below the state median, you can proceed with a Chapter 7 bankruptcy.

What happens if my income is too high?

If your income is higher than the state median, you may think you are out of luck and your hopes of pursuing a Chapter 7 have gone out the window. The truth is, that may not be the case. This is where things get a little more complicated, though. Now, instead of just looking at your income level, you need to really dig in and look at your monthly expenses in order to determine what your disposable income is.

What is the disposable income you ask? It is the amount of money you have left over after paying allowable expenses. These expenses include:

  • Housing expenses
  • Food
  • Reasonable clothing expenses
  • Transportation costs

In other words, you are looking at basic expenses. Those things you need to survive, nothing extra. If your disposable income is extremely limited after you meet your basic needs, you may still qualify for Chapter 7 bankruptcy.

If you qualify, is Chapter 7 the best fit?

The idea of having qualifying debts wiped away is intriguing to most people. While a lot of people do qualify for Chapter 7 bankruptcy and this type of relief, it may not always be the best option. There are certain benefits to pursuing a Chapter 13 filing instead, particularly if you are looking to keep certain assets.

Legal counsel can help you fill out the means test in order to figure out if you qualify for Chapter 7 bankruptcy. Together, you can then take a detailed look at your financial situation and review your goals in order to determine if this debt relief option is the best fit for your needs.


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