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What is the Means Test?
In October, 2005 Congress enacted various changes to the bankruptcy laws. Among such changes included a new test for qualifying individuals for bankruptcy filings.
In Chapter 7 bankruptcy cases, this new means test determined whether one is eligible to file under Chapter 7. In Chapter 13 cases, the means test may determine the monthly payment owed to unsecured creditors.
The means test is a form completed in most consumer bankruptcy cases.
The means test calculates your monthly income based on all income earned over the 6 months prior to filing your bankruptcy case.
If your 6-month gross income (multiplied by 2) is less than the median income for your family size, then you "pass" the means test and may qualify for a Chapter 7 filing or have no obligation to pay unsecured creditors in a Chapter 13 bankruptcy case.
However, if your income exceeds the median income in Washington State, you're your annualized income is divided by 12. Various allowed monthly expenses are then deducted from this monthly income figure.
If, after performing these deductions, the monthly income is positive (i.e. income exceeds expenses) then Chapter 7 is not likely a viable option. However, if the monthly income figure is zero or negative (i.e. expenses exceed income), then you may be eligible for a Chapter 7 filing.
Please note, the means test is merely one test in making the determination whether to file a Chapter 7 bankruptcy case.
Various other factors such as assets, financial dealings, and intentions on secured debt (i.e. whether you want to retain a home or car) are also taken into consideration when determining whether a Chapter 7 filing is appropriate.
In order to determine your legal options, it is important that you carefully complete the Chapter 7 means test linked here. This is in word document form for your convenience.
Once complete, please contact our office at (206) 442-9500 to schedule an appointment so we can perform the actual means test for you.
To receive a free consultation regarding your (or your friend or family member’s) debt problems, please contact us today.
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