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How Do You Pass Chapter 7 Means Test?

Chapter 7 bankruptcy is one of the most popular forms of bankruptcy because it allows debtors to clear their debts in less than four months. However, to qualify for Chapter 7 bankruptcy, you must pass the means test. The means test was established in 2005 and is designed to weed out applicants who have the financial ability to repay their debts under Chapter 13 bankruptcy (repayment plan). Below, our attorneys explain what a debtor needs to pass the means test.

What Do I Need to Pass the Means Test?

There are two parts to the means test to determine whether you qualify for Chapter 7 or Chapter 13 bankruptcy. The first part of the means test checks your household income to determine if it is below or above the state’s median income. For this portion of the test, you will need to show proof of your income over the last six months before applying for bankruptcy.

For the second part of the means test, you will need to show proof of your expenses over the last six months. You will need to show proof of rent, clothing expenses, and other necessary bills. That will help the bankruptcy court determine how much disposable income you have left every year. If you’re below the median income, you will then pass the means test and can file for Chapter 7 bankruptcy. However, if you are over the state average income, Chapter 13 may be your only option.

What Happens If I Fail the Means Test?

Just because you fail the means test doesn’t mean all hope is lost. If you don’t want to file for Chapter 13 bankruptcy you can hold off another six months (if possible) to file for bankruptcy then. The six-month calculator doesn’t always factor in how your income is changing in the near future. If you want to file for Chapter 7 bankruptcy but you are worried about the means test, you should speak to our team at Hurtik Law & Associates. We can guide you through the process to help you achieve financial freedom.

Contact us today at (702) 323-5750 to schedule a consultation!