Sacramento Bankruptcy & Debt Relief Attorney

Bankruptcy Means Test Meaning

What is the bankruptcy means test meaning? What even is the bankruptcy means test? Many considering bankruptcy and other debt relief options want to know. Stated simply, the bankruptcy means test is a financial evaluation of whether you qualify for certain bankruptcy protection. Passing the bankruptcy means test typically qualifies a filer for Chapter 7 bankruptcy. Chapter 7 bankruptcy is a form of bankruptcy filing resulting in the discharge, or elimination, of the filer’s debt. None of the debt normally needs to be repaid in a Chapter 7 bankruptcy.

Qualifying for Chapter 7 bankruptcy requires the filer to pass the bankruptcy means test. This, then, is the primary bankruptcy means test meaning. To “pass” the bankruptcy means test, the filer must demonstrate eligibility to file for Chapter 7 bankruptcy. What this means is that an individual or couple filing for Chapter 7 bankruptcy must prove eligibility for a Chapter 7 filing. To be eligible for filing Chapter 7 bankruptcy, filers must show, essentially, their living expenses exceed their income. Put another way, they owe more in living expenses than income earned. This recent news article clarifies many of the bankruptcy means tests basics.

When bankruptcy filers establish their living expenses exceed their income, Chapter 7 bankruptcy law allows their debts to be forgiven, or eliminated. The bankruptcy means test meaning here is that if an individual cannot afford basic living expenses, debt on top of that is incapable of being repaid. That is the purpose of Chapter 7 bankruptcy, to eliminate debt that cannot be repaid. The bankruptcy means test is the tool to test whether this is true for those filing for Chapter 7 bankruptcy.

Not qualifying for, or passing, the bankruptcy means test does not mean you cannot qualify for bankruptcy protection. But the bankruptcy means test meaning does dictate whether you qualify for Chapter 7 bankruptcy. Not qualifying for Chapter 7 bankruptcy is not necessarily bad. Sometimes other forms of bankruptcy filing, such as Chapter 13, bankruptcy, are a better bet for the filer. Every individual and family are different.

Though the concept is simple, the bankruptcy means test is one of the more complicated areas of bankruptcy law. Tread carefully here! There are numerous nooks, crannies and niches to the nuance of the means test. This is particularly so if your finances are not a natural fit for the means test. Perhaps, then, the best way to understand the bankruptcy means test meaning is to meet with a bankruptcy professional.

Bankruptcy and the Bankruptcy Means Test

The bankruptcy Means Test was a qualification standard adopted by Congress in 2005 for bankruptcy filers. It essentially determines whether you qualify for a bankruptcy liquidation, better known as a Chapter 7 bankruptcy. If you do not qualify for a Chapter 7 bankruptcy, the Means Test establishes the amount of your debt you must repay though a debt reorganization, most commonly a Chapter 13 bankruptcy.

The Means Test was established by the Department of Justice. Here is a link to their site. The Means Test is not difficult to apply, though it can be complex if you have higher income or your personal finances themselves are complex.

Even if your income is above the Means Test limit, you may still qualify for a Chapter 7 bankruptcy liquidation. Expenses are taken into consideration and, if higher than the norm, they may offset your income allowing you to qualify. There are other factors, too, that impact the figures for the Means Test. Suffice it to say, there is a lot that goes into the Means Test.

And even if you do not qualify for a Chapter 7 bankruptcy under the Means Test, you can still qualify for filing bankruptcy under a Chapter 13 bankruptcy reorganization. This means you have to pay back a portion of your debts; but it also means that whatever portion of debt you don’t repay is discharged.

Sometimes, too, there are benefits to filing a Chapter 13 bankruptcy to reorganize your debt. Since you repaying a portion of your debt in a Chapter 13 bankruptcy, the government provides incentives to guide you in this direction. Many of the benefits of filing for Chapter 13 are found throughout this website.

Bankruptcy means test: what is it?

The means test in bankruptcy is a test to determine whether someone qualifies for bankruptcy. What the means test measures is whether someone can afford to pay their debts. If they can’t, their debts can be discharged, or eliminated, through a bankruptcy filing. If they can pay their debts, or at least a portion of them, the means test tells what they than can pay and what they can’t. Whatever debt can’t be paid can be discharged through bankruptcy.

There are a number of factors that go into the means test including, but not limited to, family income, size and expenses. Since the many variables can make the difference whether someone qualifies for bankruptcy or not, it is best to seek help on this subject.

Remember, bankruptcy consultations are always free!