What is a "Means Test" for Bankruptcy?

Posted by: California Bankruptcy Attorney on Feb 18, 2010 Print PDF

When you're considering filing for bankruptcy, one of the first things a competent California bankruptcy attorney will explain to you is the “means test”. The means test is a formula designed to keep people with a higher level of income from filing for Chapter 7 bankruptcy. As your California bankruptcy attorney will explain, Chapter 7 is considered the generally more desirable form of bankruptcy, because in Chapter 7 your debts are often completely discharged, whereas in Chapter 13 bankruptcy, you still have to pay back many of your debts.

Chapter 7 Bankruptcy: California Bankruptcy Attorney Explanation

In the Chapter 7 means test, your monthly expenses are deducted from your monthly income. Your monthly income is calculated by averaging your income over the six months before filing for bankruptcy. Through balancing a set of complex factors, the means test tries to determine if you have enough disposable monthly income to pay off at least some of your debts.

A California bankruptcy lawyer comes in very handy at this point in the process, helping you to think of expenses you might not have considered that makes your disposable income lower. A Chapter 7 bankruptcy attorney can tell you that you don't have to be a pauper to qualify for Chapter 7. In fact, despite new laws, many middle class individuals can still qualify for Chapter 7. Californians should consult with a California bankruptcy lawyer to determine their eligibility.

You can bypass the means test entirely if your current monthly income is less than the median income for a household of your size in your state. To help you determine if you qualify automatically or need to complete a means test, ask your California bankruptcy attorney.

Chapter 13 Bankruptcy: California Bankruptcy Attorney Explanation

If you don't qualify for Chapter 7 bankruptcy, your California bankruptcy attorney will help you file for Chapter 13 bankruptcy. Basically, in Chapter 13, you must fully or partially repay your debts, but can keep some of your property. In some cases, you can stop foreclosure proceedings when you file for Chapter 13, provided you receive the help of a California bankruptcy lawyer. To understand Chapter 13 in more depth, consult with a Chapter 13 bankruptcy attorney.


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