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What Is a Means Test?


In 2005 the new bankruptcy law was amended which established a means test for those who wish to petition for a Chapter 7 bankruptcy. The stated purpose of the test is to weed out those who do have the means for Chapter 13 by use of a formula. This was inserted as a requirement to benefit credit card companies by forcing more people to file under Chapter 13 and develop repayment plans. As with any new law, the courts are continually interpreting the law and establishing new case laws. This can make it very difficult for the average person who doesn't keep up with the latest decisions. A West Palm Beach bankruptcy attorney who stays informed of the latest decisions can help you to figure out if you qualify.


The test is in two parts, the first part of which is straight forward. It is based on gross household income. If your gross income for the last 6 months is less than the established amount, you qualify for Chapter 7. If your income is higher than the amount allowed for your area then you will have to do the second part of the test to find out if you qualify. This is where it gets more complicated.


In this section you deduct certain expenses to find out how much disposable income you have left. If your disposable income is less than the allowed amount, you can file for Chapter 7. If your disposable income is too high you can file under Chapter 13 or you may qualify to argue for "special circumstances". The Department of Justice publishes the expense amounts on its website and updates them periodically. If you do not qualify in the first phase of the means test, the best thing to do is consult a bankruptcy lawyer who has a thorough understanding of the requirements and can quickly simplify the process for you.

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