You Have the Choice to Take Back Control of Your Financial Future.

What is the means test?

| Nov 6, 2017 | Bankruptcy Reform

When you hear about bankruptcy in Florida, one of the main things brought up is the means test. This is a very important aspect of qualifying to file for bankruptcy. It is a two part test that takes a look at your income and expenses to determine which type of bankruptcy you can file, according to Nerd Wallet.

The first part of the means test looks at your income. You will need to report and show documentation for all earnings, business income and other income. It does look at the past six months, but if there has been a recent change, that is taken into consideration. Your median income is compared to a set income amount based on the average median income. If your income is below that, then you pass the means test and do not need to do part two. You are allowed to file Chapter 7 bankruptcy.

If you want to file Chapter 13 or did not pass step one, then you must do part two of the test. This part will ask for information about your expenses, which are then taken into consideration and compiled with your income reporting to get a better idea of your financial situation. If you show you have very limited disposable income, then you will likely pass the means test. For Chapter 13, the information gathered is usually used to create your repayment plan.

The means test is an important part of bankruptcy reform because it limits who can file Chapter 7 and completely wipe out their debts. This information is only intended to educate and should not be interpreted as legal advice.