Passing The Means Test

By Price Law Group  Dec. 10, 2012 1:40p

What You Need To Know Before Filing For Chapter 7 Debt Relief

If you have been considering ending your debt and seeking a fresh start, you are not alone. More than one million Americans filed for Chapter 7 bankruptcy in 2011 alone. In these troubled economic times, there is no shame in beginning a new financial era with the help of a bankruptcy attorney.

Chapter 7 is primarily intended to help those people stuck in untenable financial situations with a large amount of debt and few or no prospects in the near future. You will be forced to give up any non-exempt assets you own, which will be sold off to pay your creditors. Once this is finished, a process that usually takes only a few months, your debt is legally waived and your creditors satisfied!

If you wish to file for Chapter 7 debt liquidation, however, you must first undergo what is known as the "means test." You will be required to pass this process before you will be considered eligible for filing for this form of debt relief, thanks to recent legislation intended to curb abuse of Chapter 7 by those with the money to pay off their debt through other means.

What does the Means Test actually entail?

In order to prove yourself eligible to apply for Chapter 7, you will have to prove your qualifications in a two-fold process. The first step of the means test involves a relatively simple calculation of your annual income by a court-appointed trustee. This number is then compared to the median income in your area. If your income is on the lower half of those around you, you automatically pass the means test and will be allowed to file for Chapter 7.

If not, you must qualify under a slightly more complex process. Again, your trustee will examine your finances and calculate your disposable income. The exact process for determining this number usually varies from state to state. Once this is finished, the trustee will determine if you qualify under the legal limit, which again varies by location.

If you pass both parts of the test, you will be allowed to file for Chapter7 debt liquidation. This is often the simplest and quickest path to ending your debt. If not, however, you will likely need to file under Chapter 13, which involved creating a repayment plan over several years.

Seek An Attorney To Help You Get Back On Track

Please, do not suffer any longer under the burden of your debts! At Price Law Group, our team has decades of experience handling a wide variety of bankruptcy cases. If you wish to start over without the weight of financial debt, we urge you to contact our firm or visit our website at to begin the process today. If you need help in Oakland or anywhere in California, we can help.

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