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What is the Chapter 7 means test?

If you are struggling with debt, then you may view a Chapter 7 bankruptcy as your most beneficial alternative to escape the threat of legal action being initiated by your creditors and to re-establish yourself on a firm financial footing. However, like many others in Fort Lauderdale who have sought the same protection, you may be surprised to learn that you must first qualify to file under Chapter 7. To determine your eligibility, you must take the Chapter 7 means test.

According to the website for the United States Courts, the means test must be administered if your current monthly income is higher than the state median for your particular demographic. Your result is determined by subtracting certain allowed expenses from your monthly income. These may include:

  •          Housing
  •          Basic necessities
  •          Transportation

The amount left over after considering such expenses is your disposable income. That amount is then compared to your remaining unsecured debts. If, after averaging out data over five years, your disposable income is more than either $12,475 or 25 percent of your nonpriority unsecured debt, you are assumed to be abusing the privilege provided by bankruptcy and thus cannot file under Chapter 7.

Failing the Chapter 7 means test does not necessarily mean that your bankruptcy case is over, however. If you wish to continue, you could choose to convert your case over to a Chapter 13. This would mean that rather than having your debts discharged, you would simply need to meet your obligations over a 3-5 year period. Such a decision will still halt collections efforts, and may allow you to still retain assets such as your home and your personal vehicles. 

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