Means Test

Professional Chapter 7 and Chapter 13 Litigators

Since October 2005, any person in the United States who wishes to file for Chapter 7 or Chapter 13 Bankruptcy must pass a test known as the “means test”.  The means test determines if people are eligible to file for bankruptcy and is performed by the U.S. bankruptcy courts.  When the court administers this test, the goal is to make sure that Chapter 7 is available to people who really cannot afford to repay their debts and that Chapter 13 is reserved for people who have sufficient income to repay creditors.

During the means test, a bankruptcy court judge will calculate a person’s average income.  The income taken into consideration is the money people have earned 6 months before they filed for bankruptcy.  The average will then be compared to the state’s median income.  If the person’s average income is much lower than the state’s median income, he/she will be eligible for Chapter 7 Bankruptcy.  For example, if a person has an average income of $40,000 and the state’s median income is $50,000, the person would pass the means test and be eligible to file for Chapter 7.

If the person’s average income is higher than the state’s median income, the court will assume that the person is capable of making at least minimal payments to their creditors.  So, the person may be told he/she is eligible for Chapter 13 Bankruptcy.  With Chapter 13, people have to repay their creditors over the course of 3 to 5 years and their debts are not eliminated, as is the case with Chapter 7.  

The laws surrounding the means test can be quite convoluted, which is why people stand to benefit from speaking with a qualified bankruptcy lawyer before initiating bankruptcy proceedings.  With help from a professional bankruptcy attorney, like the attorneys at The Arizona Bankruptcy Law Firm people will receive the information they need to understand the bankruptcy process and the means test.

Arizona Bankruptcy Lawyers
If you are having a difficult time keeping up with your financial obligations, now is the perfect time to review your options with an experienced Arizona bankruptcy lawyer, like the lawyers at The Arizona Bankruptcy Law Firm.

The Arizona Bankruptcy Law Firm is committed to helping individuals throughout the state of Arizona file for Chapter 7 and Chapter 13 so they can get out of debt quickly.