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Information Center

Means Test

(847) 699-7500

Anyone who is seeking to file bankruptcy has to take up the means test. This test is to ensure your incapability of paying off debts. The bankruptcy code has been framed in such a way that only the one who actually needs a waiver of debt will get the benefits of this code. And to get through Chapter 7 Bankruptcy, one has to first qualify in the means test. It was framed to protect the public interest.

Even if you are left out with a manageable income to pay off debts including bills, you can discharge your debts under Chapter 7 Bankruptcy. The means test is a two-step process which determines whether or not an individual will be able to discharge the liabilities. The balance surplus, if any, left out after applying the method shall be used to discharge the creditors.

You can also wipe off your personal loans, curative medicinal bills, and credit card dues.

Also, note that only consumer dues have to go through the means test.

The Means Test Process
Step 1: Comparison
The step one begins with the comparison. Your income is compared with the income of any similar resident in the state who bears the same family size as yours. The demographic conditions may also affect the results of the test. Based on such comparisons, your eligibility will be determined.

However, if you fail in step 1 of the process, step 2 comes to your rescue.

Step 2: Debt Classification
It is not as simple as step 1. The expenses as allowed by the IRS guidelines are deducted from your total income to compute disposable income. It is pertinent to note that the income of the last six calendar months before filing for bankruptcy shall be taken for computing the disposable income for testing the eligibility of Chapter 7 Bankruptcy.

To qualify in step 2, your estimated disposable income should be between $100 and $300 per month. However, after crossing $100/month another method is used. This method states that if 25 percent of your unsecured (non-prioritized) dues are more than your computed disposable income, then you qualify the test.

The computation consist of various steps which makes the process and computation quite challenging. However, the understanding of rules is quite a tough job than computing numbers. The classification of debts as secured and unsecured, prioritizing of debts requires a good know-how of legal language and rules.


If you would like to speak to an experienced Chicago area bankruptcy attorney about the Chapter 7 means test, or any other aspect of bankruptcy law, call he Law Office of Daniel Podkowa at (847) 699-7500 today.

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