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The Means Test

The means test is the Court’s way of determining whether you qualify for Chapter 7 or Chapter 13 bankruptcy. This new law requires the Court to review your income and expenses over the past six months to determine whether you have disposable income. The Court requires copies of all your pay stubs over the past six months, including all other income. This sum is then averaged out, and monthly expenses for rent, food, utilities, transportation, clothing, recreation, etc. are subtracted. The totals for these expenses will not be based on your numbers but on predetermined data used by the Court, which is based on IRS standards, your county, and your family size.

If you have no money left over or are in the negative, you pass the means test and qualify for a Chapter 7 bankruptcy. If you have $180 or more left over each month, you do not qualify for Chapter 7 bankruptcy but may file under Chapter 13, paying your disposable income each month to the Court to be redistributed to your unsecured creditors. Chapter 13 bankruptcy lasts between 36 and 60 months, and, upon completion, the unpaid balance of the debt is discharged. Under a Chapter 13 bankruptcy, it is not unusual to pay back 1% of your debt to creditors and discharge the balance.