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What is the means test for qualifying for Chapter 7?

Long Island residents who are facing significant financial hardships have many options available to obtain debt relief. Among these alternatives is filing for bankruptcy. One of the most common forms of bankruptcy chosen by debtors is Chapter 7. Many debtors may assume that they can file for whatever form of bankruptcy works best for them, however, there are certain qualification that must be met before filing for Chapter 7 bankruptcy.

One of the most significant required qualifications is the Means Test, which was signed into law in 2005 through the Bankruptcy Abuse Prevention and Consumer Protection Act. The Means Test is essentially a collection of questions about a consumer’s finances to determine if they qualify to file for Chapter 7 bankruptcy. The test determines a debtor’s current monthly disposable income. If the amount of disposable income is too high, the debtor will not qualify for Chapter 7 bankruptcy and will likely have to file for Chapter 13 instead.

The test is designed to ensure that only those who truly cannot afford to tackle their personal debt on their own utilize Chapter 7. The test requires a debtor to compare their current income with the median family income for their state. If their income is more than this amount, they will then need to ascertain if their disposable income will allow them to pay their creditors. If they make less than the median family income, of if they do not have enough disposable income to pay their creditors, they may be able to file for Chapter 7.

Those who qualify still need to determine if filing for bankruptcy is right for them. This can be done by consulting a bankruptcy attorney or financial professional to assess their financial situation and decide the best course of action for debt relief.

Source: FindLaw, “Who can file for Chapter 7 bankruptcy?” accessed Sept. 22, 2015