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What the means test means for your bankruptcy filing

On Behalf of | May 28, 2019 | Uncategorized

Are you struggling with different types of debt? You may know that one of the options available to you includes filing for Chapter 7 bankruptcy, but you may not realize that not everyone is eligible. Before you can move forward with Chapter 7 bankruptcy protection, you may have to complete the means test. 

The Means test has been around since the U.S. Congress overhauled U.S. bankruptcy laws in 2011. The test will determine if you are eligible for Chapter 7. It is basically a calculation based on your ration of available financial assets (income) to your debt. If the results of the means test reveal that you are not eligible, you have the right to explore other options, including Chapter 13 bankruptcy. Before you move forward, you may want to learn more about what to expect from this test and what factors determine if you qualify for bankruptcy protection.

What is the means test?

The first part of the means test will look at your monthly income in order to determine if you can pay your bills or meet the terms of a bankruptcy payment plan. If your monthly income is less than the state’s monthly median income, you are likely eligible for Chapter 7 bankruptcy. Some of the types of income the means test will take into consideration include the following:

  • Income from a farm, business or profession
  • Any wages you earn, including your salary, bonuses, commission and more
  • Income from rental property or real estate
  • Spousal support or child support
  • Income from retirement accounts or pension plans
  • Workers’ compensation income or unemployment income
  • Disability payments

Income that will not affect the outcome of your means test includes Social Security retirement income, disability payments, tax refunds and specific types of government assistance benefits. If your income is more than the state’s median income, you will have to complete the second part of the means test. The second part will deduct your expenses. After this step, if your disposable income is enough to make payments, you will likely be eligible for a Chapter 13 repayment plan. 

The right choice for your future

It’s not easy to make the choice to move forward with a bankruptcy filing. You may not want to take this step, but it is in your interests to find out if this option is an optimal way you can secure a better financial future for yourself and your Tennessee family. Bankruptcy can allow you deal with some of your debt once and for all, and you may want to learn more about what to expect from the means test and the rest of the steps in the Chapter 7 process.


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