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What is a “means test?”

The two most common forms of personal bankruptcy are Chapter 7 and Chapter 13. In order to determine which one you qualify for, you must pass a “means test.” The means test was instituted in 2005, when the United States changed its bankruptcy laws, in order to prevent wealthy people from declaring bankruptcy and avoiding their debts.

The means test is calculated by comparing your average income for the past six months against the median income for households of the same size in your state of residence. If your income is equal to our less than the state’s median income, then you pass the means test and can file for Chapter 7 bankruptcy. Basically, the means test is an income and expenses test.

If your income exceeds that of the state’s median income, then you’ve likely failed the means test and may instead qualify for Chapter 13 bankruptcy. The means test will then see how much you can afford to pay each month for a Chapter 13 payment plan.  The test will look at your household budget, excluding the debts that would be paid after filing for bankruptcy. After taking away those debts, if your income and expenses allow you to make a monthly payment, then you will file for Chapter 13 rather than for Chapter 7.

Call us toll-free today at 1-800-260-1402 for your complimentary initial bankruptcy consultation or visit one of our 100 offices across the United States. You can also read our many informative articles on our website,  For the best advice on filing for Chapter 7 or Chapter 13 bankruptcy protection, trust the experienced and caring attorneys at Jacoby & Meyers Bankruptcy Law.

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