What is the means test?
Posted on Monday, October 13th, 2014 at 2:11 pm
The means test is a formula used to determine whether you are eligible to file for Chapter 7 bankruptcy. In order to file for Chapter 7 bankruptcy automatically, your income must be below the median income for the typical family of your size in your state. If your income is less than the median income then you automatically qualify for Chapter 7 bankruptcy.
If your income is greater than the state median income, you will have to continue the means test. Earning more than the median income makes the formula less clear cut. The test will then determine if you have enough disposable income to pay off debts after paying for certain allowed expenses (such as rent and mortgage). High income earners will not qualify for Chapter 7 bankruptcy because they can pay off certain debts. High earners may qualify for Chapter 13 bankruptcy. However, you may qualify for Chapter 7 bankruptcy if your disposable income would not allow you to maintain paying all of your debts.
An experienced bankruptcy lawyer can help you determine which type of bankruptcy is best for you. Call (919) 758-8879 today to begin getting your finances on track.