How the Means Test in Chapter 7 Is Applied
The means test calculation for a Chapter 7 bankruptcy is the method by which the court determines your eligibility for this solution. By subtracting monthly expenses from monthly income, this test enables the government to assist those who are genuinely unable to pay their debts. These figures reflect the average income and expenses for the six calendar months preceding the bankruptcy petition. Two considerations pertain to Chapter 7:
Median revenue. If your income is below the median income for a household of your size in your state, you are fully qualified and do not need to complete the remainder of the test. Due to the fact that your monthly income is below the median, declaring bankruptcy is completely understandable.
Disposable income. Nonetheless, if your income is greater than the state's median income for households of your size, the test will determine your disposable income, or the amount of money left over after paying your monthly expenses. Due to the allocation of funds for lodging, transportation, food, and other necessities, the calculations for the means test are complex. If your disposable income is excessive, you must file for Chapter 13 rather than Chapter 7 bankruptcy.
What Occurs Upon Passing the Means Test
If you pass the means test, your primary consideration is whether or not you should file for bankruptcy. Remember that just because you qualify for Chapter 7 bankruptcy does not mean you should file. Have you considered all of your options, or is Chapter 7 your best choice? By thoroughly evaluating your options, you will ensure that you make the best choice for yourself, even if that means declaring bankruptcy.
Failure to Pass the Means Test
In contrast, failing the means test restricts you to filing for Chapter 13 bankruptcy. You can thankfully reorganize your debt to make the monthly payments more manageable and budget-friendly. Filing for Chapter 13 bankruptcy is a wise decision for many individuals seeking to avoid problems such as mortgage default. However, before making any judgments, you should consult with a bankruptcy attorney to determine the best course of action.""
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