Qualifying For Bankruptcy

The Latest Means Test

The decision to file either a chapter 7 or chapter 13 depends upon whether an individual has above median income and then whether that individual passes the means test.

It works like this – To file a chapter 7, an individual must ether make below the median income (to view the current median income limits click here),  or pass the means test. The means test compares the family's monthly income (based upon the average monthly income earned by the family over the 6 months before filing the bankruptcy case) against IRS generated monthly living expenses found in latest Means Test Chart. If the end result of the test is that there are no funds available to pay unsecured creditors, the individual is able to file a Chapter 7. If there are funds available to pay unsecured creditors, the individual must file a 5 year Chapter 13 case.

In Chapter 13, an individual's experience differs if the person is below the median family income or above the median family income. If a person is below the median family income, he or she can do a 3 to 5 year repayment plan. If the person has above median family income, the person must do a 5 year Chapter 13 plan. The precise amount a person must pay in the repayment plan to successfully complete the case is dependent upon whether the person is above or below the median family income. If the person is below the median income, the traditional technique for formulating a Chapter 13 plan works. If the person has above median income, the person must run through a disposable income test which, again, uses IRS generated expenses to determine the necessary to pay unsecured creditors through the 5 year plan.