The Means Test

A Requirement for Chapter 7 Bankruptcy

In order to qualify for Chapter 7 bankruptcy a debtor must pass a means test. This is a test conducted involving a specific formula, which will vary from state to state, in order to determine whether the debtor has the financial means to pay creditors in a Chapter 13 repayment plan or if a Chapter 7 liquidation will be their only option.

The means test begins by a comparison of the debtor’s income to the median income in Illinois for a similarly sized family. While this step may seem relatively simple, there is a second step to the process. This means that even if you do not pass the first step you may still be able to qualify for a Chapter 7 case, depending on the situation.

The second step of the means test is slightly more complicated and involves a breakdown of your income and expenses in order to calculate your disposable income. There are particular costs that are considered allowable expenses by the IRS that can be subtracted from your income in order to determine this amount. While the particular amount of allowed disposable income may vary depending on where you live, a general guideline is that if it is less than $6,000 you are likely in the clear to continue with a Chapter 7 case. However, this may vary and so it is still important to discuss your particular situation with a lawyer.

Consult an Attorney about Your Chapter 7 Means Test

Determining whether you qualify for Chapter 7 bankruptcy under the means test can be complicated, and if handled improperly you may lose your chance to file under Chapter 7 altogether. Chicago bankruptcy attorney Joseph Doyle is experienced with these situations and can address your case in order to help ensure you are properly represented.

Learn more about bankruptcy and the means test by contacting our office today for a free consultation.