How to Use the Bankruptcy Means Test

How to Use the Bankruptcy Means Test

When it comes to bankruptcy, it seems like there’s been an ongoing battle between creditors and debtors for a long time. In the U.S., for example, there have been a series of bankruptcy laws during our history which sometimes benefited the creditors and sometimes the consumer. Recently, a law was passed by Congress as a result of extensive lobbying by the credit card industry.

Essentially, this law tries to make it more difficult for someone to file for bankruptcy, specifically chapter seven bankruptcy where most of your debts are completely wiped out. The new law was passed in 2005, and one of the main provisions was the means test. This test tries to determine whether or not you can actually pay your debts.

The first thing you should know is how your income compares to other people’s income in your own state. If your income is below the median income of your state, then you don’t even have to worry about that means test. This makes sense, of course, because if you have a lower income you’re less likely to be able to afford your debts.

If your income is higher, however, you’ll have to go through the annoying process of calculating all of your income and expenses. Based on this, the court will determine whether you can afford to pay both your necessary expenses and your consumer debt. If the court determines that you make too much money, you may be forced to pay part or all of your debt (though you’ll probably be given a repayment plan as part of a chapter 13 bankruptcy).

Chances are you’ll qualify for bankruptcy, but you have to go through the new process step by step with good legal advice by your side.

Don’t let the fear of your debt take over your life. Get the facts about bankruptcy and learn how to get control of your debt. To learn more about bankruptcy means tests visit us at http://personalbankruptcyquestions.org