How to Take a Bankruptcy Chapter 7 Means Test
The bankruptcy means test was designed to determine if an individual is eligible to file for chapter 7 bankruptcy. By law a person is required to take this test in order to determine if their income is above or below the median income in their state. If an individuals income is above the median, then that person must file for chapter 13 which is not a complete elimination of debt but rather a restructure of debts to be paid over a certain period of time. The following steps outline how to take the chapter 7 means test.
- Difficulty:
- Moderately Easy
Instructions
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There are many web sites that provide a link to the means test, one in particular I personally recommend is www.legalconsumer.com. The calculator is free and does not require registration as most others do. You simply click on the Free Means Test Calculator link which will prompt you to either enter your zip code or you may also choose your state of residency since bankruptcy laws are different for many states and you want to make sure you're getting the information specific to the state you live in.
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The calculator will determine whether or not you must take the means test by asking for the number of people in your household along with your average gross monthly income over the last six months. If you exceed the median income then you will be required to take the means test which will give you an opportunity to list certain allowed expenses to see if you qualify for chapter 7 bankruptcy.
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The means test is broken down into several sub categories which allows you to list certain expenses as deemed allowable by the IRS to determine if you're eligible for chapter 7 bankruptcy. These expenses range from food, clothing and household supplies to housing, utilities and vehicle expenses. Once the deductions are taken into consideration, your bottom line amount will be the final determining factor in whether or not you quality for chapter 7 bankruptcy. The actual amount may differ from state to state so you will need to take the means test to determine your eligibility.
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In conclusion, a majority of people who take the means test find out they are in fact eligible to file chapter 7 bankruptcy. However, there are those few who do not quality and therefore must file chapter 13 which doesn't completely let you off the hook but is still an alternative if you find yourself no longer able to meet your financial obligations to your creditors. Keep in mind that both chapter 7 and 13 will remain on your credit for at least 7 years and may affect your ability to obtain credit in the near future.
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Tips & Warnings
Keep in mind that the means test is only a tool to determine eligibility. It's best to consult with a bankruptcy attorney in your area if you decide you're going to pursue filing bankruptcy.
