Understanding The Means Test

What is it?

One of the most common questions facing you when you decide to seek bankruptcy protection is whether to file for Chapter 7 debt liquidation or Chapter 13 debt reorganization. For many clients, those facing a large amount of credit card debt or other unsecured debt, and lacking a reliable source of income to pay it off, Chapter 7 is the best option.

Since 2005, however, in order to qualify forChapter 7 each client must undergo what is called the ‘means test’. This is a process wherein the court determines your ability to pay off your debt in a more traditional manner. The purpose of the means test is to prevent clients who could theoretically pay their creditors back through debt reorganization from abusing the Chapter 7 debt relief process. It is essential that you speak with a Queens bankruptcy lawyer before attempting to file for bankruptcy.

Income Qualification

The actual specifics of the means test generally involve a two-part method of determination. The court will examine your financial records, looking at the average amount of income that you have made over the last 6 months. This average is then compared to the median income level for a household of your size in the state of New York. If you fall below the median, you automatically qualify for Chapter 7.

The second part of the test only occurs if your income is determined to be above the state median. The court will take a more in depth look at your finances in an attempt to decide whether you could pay a reasonable amount of your debt back via Chapter 13. The precise calculation takes a variety of factors into account. You will need to discuss the matter with a trained bankruptcy lawyer to help guide you through the process.

A Bankruptcy Attorney Can Help

It is imperative that you discuss the details of the means test and chapter 7 and 13 bankruptcy filings with a qualified legal professional before making any decisions about your future. At Bronson Law Offices, we are dedicated to protecting the interests of our clients aggressively and without rest.

To learn more about your options, contact a Queens bankruptcy lawyer right away!