Chapter 7 bankruptcy is a form of bankruptcy that individuals may pursue when they cannot manage the repaying of their outstanding bills and debts. In order for a Miami resident to qualify for its legal protections, however, they must satisfy the Chapter 7 bankruptcy means test. This post does not provide financial or legal advice, and readers with Chapter 7 bankruptcy questions can direct them to their trusted bankruptcy and debt relief attorneys.
The means test of Chapter 7 bankruptcy
The means test is designed to determine if a debtor can, or has the means, to repay some of all of their debts. The first part of the means test compares in the income of the debtor to the median income of the state in which they live. Income is given a broad definition in this evaluation and only the income the debtor made in the six months preceding their bankruptcy filing are considered.
If the debtor’s income falls below the state’s median income, then they qualify for Chapter 7 bankruptcy. If it does not, they will be evaluated under the second step of the test. After deducting certain expenses from their income, the debtor’s remaining income will be evaluated. If they can pay off some of their debts with their leftover income, they may not qualify for Chapter 7 bankruptcy.
Options when debtors fail the means test
Failing the Chapter 7 bankruptcy means test does not mean that a debtor cannot pursue bankruptcy. They may be able to use Chapter 13 bankruptcy to manage their financial obligations. One of the best ways for a debtor to understand their legal options when it comes to bankruptcy is to talk to a legal professional about what protections they may be able to secure through the bankruptcy process.