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Bankruptcy Means Test

In 2005, a new set of bankruptcy laws were enacted to make it more difficult for people to file for Chapter 7, the form of bankruptcy that eliminates non-secured debt. The laws were created to try to force more people to file for Chapter 13, which requires a debtor to repay their debt over the course of three to five years.

Now if a debtor wants to file for Chapter 7 bankruptcy they must first pass a means test. This requirement is part of the new bankruptcy laws and was included to weed out people who can afford to pay off their debts through Chapter 13. The first part of the Means Test is to determine whether or not your current monthly income is less than the median income for a household of your size in your state. If your household income is less than your state’s median income for a family of your size, then you pass the Means test. This means you can proceed forward and file for Chapter 7.

If your household income is more than your state’s median income for a family of your size, then you must take one more step, which is to complete a worksheet to calculate whether or not you make enough money to repay your creditors. After completing the worksheet, if you have a large enough income to pay a significant portion of your debt, you will fail the Means Test and will not qualify for Chapter 7. You can file for Chapter 13 or you can look into some other debt relief options, such as credit counseling, debt consolidation, or debt settlement.

Thinking About Filing for Bankruptcy?

If you are interested in reducing or eliminating your debt through bankruptcy, you should take a moment to consult an experienced Los Angeles bankruptcy lawyer at Pacific Attorney Group. We can review your financial situation and identify whether or not you’re likely to pass the Means Test. To schedule an appointment with an attorney at our office to discuss filing for bankruptcy, please call (213) 236-4400 today!

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