The Chapter 7 Means Test

One of the most powerful legal tools available for those with crippling debt obligations is a filing for Chapter 7 bankruptcy protection. This form of bankruptcy involves the liquidation of certain assets to repay creditors, resulting in the discharge of most or all of an individual’s debts. However, in order to qualify for the benefits of Chapter 7 bankruptcy, in most cases a debtor must first pass what is known as the means test.

If you or someone you know is considering filing for bankruptcy, an experienced legal professional can help you understand your legal rights and obligations. Contact the Cedar Rapids bankruptcy attorneys of Hong Law, PLC today at (319) 294-5853 to speak with a qualified member of our legal team about the details of your situation.

Understanding the Means Test

The means test in Chapter 7 bankruptcy assesses an individual’s monthly income in order to determine whether or not they may be eligible for Chapter 7 bankruptcy protection. The test works in the following way:

• The debtor’s income for the previous six months is assessed and averaged.
• If the debtor’s average monthly income is below the median monthly income (based on family size) in the state in which they file, they will automatically qualify for Chapter 7 bankruptcy protection.
• If the debtor’s average monthly income surpasses the median monthly income in the state in which they file, their disposable income will be examined. If the debtor’s disposable income is below a certain amount, they will be eligible to file for Chapter 7 bankruptcy.
• If the debtor’s average monthly income and their disposable income both fail to meet the requirements of the means test, there may still be certain circumstances which will allow them to file for Chapter 7 bankruptcy.

These are the basic factors which are considered in order to determine whether or not an individual may pursue Chapter 7 bankruptcy as a solution to their financial problems.

Contact Us

Making the decision to file for bankruptcy can be understandably daunting. Fortunately, you don’t have to go through this difficult process alone. Contact the Cedar Rapids bankruptcy lawyers of Hong Law, PLC at (319) 294-5853 today to discuss your situation with an experienced legal professional and learn more about your rights and options under the law.