The Means Test and Chapter 7 Bankruptcy

Chapter 7 bankruptcy erases a person’s unsecured debts completely. It is an option available to people who are greatly indebted but do not have enough income to offset their debt. However, in order to qualify for Chapter 7 bankruptcy, a person must first pass the Court’s “means test,” which is a complicated formula used by the Bankruptcy Court to determine whether a person can afford to pay back his or her unsecured debts.

Facing the decision to file for bankruptcy is not easy, but you do not have to go through the complicated legal process alone. The Cedar Rapids Chapter 7 Bankruptcy lawyers of Hong Law, PLC, can help you through this difficult time in your life. Contact our experienced Cedar Rapids bankruptcy lawyers at (319) 294-5853 for a confidential case evaluation.

The Means Test

The means test involves a complex multistage analysis of your current monthly income and expenses to determine if you can pay back a significant portion of your unsecured debts. If your total household income is below the state average (or median) income, you will automatically pass the means test. If your total household income is above the state average income, however, you can still pass the means test if your monthly expenses are also above average. While the calculations are fairly complicated, the vast majority of people considering bankruptcy in Iowa can pass the means test and qualify for Chapter 7 bankruptcy.

Even if you do not pass the means test, you may still qualify to file Chapter 7 bankruptcy if there are any extenuating special circumstances in your case. The Cedar Rapids Chapter 7 bankruptcy attorneys of Hong Law, PLC, can help determine whether you are able to pass the means test and whether any special circumstances apply in your case which would allow you to file Chapter 7 bankruptcy if you do not qualify through the means test. Fortunately, if you do not qualify for Chapter 7 bankruptcy and there are no special circumstances in your case, you may still file for Chapter 13 bankruptcy.

Contact Us

Applying for bankruptcy is an overwhelmingly daunting order. If you need help going through the process, the Cedar Rapids bankruptcy lawyers of Hong Law, PLC, can help you understand bankruptcy and its consequences. Call our experienced bankruptcy attorneys at (319) 294-5853 to learn more about how we can serve you.