The Means Test and Chapter 7 Bankruptcy

Since 2005 federal bankruptcy law has required that a debtor pass a means test in order to file for bankruptcy under Chapter 7 of the U.S. Bankruptcy Code. The means test is based off a particular formula that takes the debtor’s income and disposable income into account in determining whether they are above or below the median income level for the state in which they reside. If a debtor earns too much money or has a large amount of disposable income, this may mean that he or she must file a Chapter 13 case.

A Chapter 7 bankruptcy is typically much quicker than a Chapter 13 case. Under Chapter 7, debts may be discharged within approximately 6 months. Because Chapter 13 cases involve repayment plans that may last for 3 to 5 years, all eligible debts will not be discharged until that time. Depending upon your particular situation and the outcome of your means test, you may want to file a Chapter 7 or Chapter 13 petition. Dupage County bankruptcy attorney Joseph Doyle can meet with you and can review your particular financial situation in order to determine what route may be better for you now and in the future.

Dupage County Bankruptcy Lawyer

Working with a lawyer is important if you are considering a Chapter 7 bankruptcy. The means test can become complex because it will take different “allowable expenses” into account, based upon regulations by the IRS. Your lawyer can make sure that your expenses are accurately listed and that you get the outcome on the means test that you should. Additionally, there is a certain gray area in this regard that may require professional attention to resolve.

Contact our firm today to get more information about qualifying for bankruptcy and how the means test may affect you.