What is the bankruptcy Means Test?

Bankruptcy Means Test learn more with Rank & Associates, P.C.

What is the Bankruptcy Means Test, and what if I don’t pass it?

Before you get very far into the bankruptcy process you’ll hear about the bankruptcy Means Test. It sounds so intimidating! Don’t worry, this test is not on you personally, it’s just a test of your financial position. This test is used to determine what kind bankruptcy you may be eligible for. There are two types of bankruptcy filings for individuals and small business, Chapter 7 and Chapter 13.

Most of our clients are more interested in filing Chapter 7 bankruptcy. It’s much faster than filing Chapter 13 bankruptcy, and it simply eliminates unsecured debt. A Chapter 13 bankruptcy takes 3-5 years and consists of consolidating debt, eliminating some of it and paying back what you can afford.  Chapter 7 bankruptcy is simpler so there are restrictions on who can file it and have their debts eliminated. The bankruptcy Means Test determines if you are eligible to file Chapter 7 bankruptcy, or if you’ll need to look into Chapter 13.

The Bankruptcy Means Test is pretty simple, you just need to answer these questions.

It’s even easier when you come on into our office. We’ll do this with you, we take educating our clients very seriously. We’ll help you answer these questions in no time.

Do you make more than the median income here in Oregon?

Is your current monthly income more or less than the state median for a household the same size as yours. We have those median income numbers for individuals and families big or small. We simply compare your income to other Oregon families the same size as yours. These numbers can also differ depending on where you live. Don’t worry, we have the numbers you need.

If your income is smaller than the median income in your part of Oregon, congratulations, you just passed the Means Test. Not so mean after all! This means you are automatically eligible to file Chapter 7 bankruptcy.

Do you have enough disposable income after living expenses to make some debt repayments?

If your income is higher than the median income for other households your size then we’ll help you work through the second part of the Means Test. This will mean determining how much ‘disposable’ income you actually have. Disposable income just means whatever is left after you pay for housing, food, utilities, transportation etc. The Means Test is now used to see if you have enough extra monthly income to pay back at least of some of your debts. If you don’t have enough disposable income each month to make payments on your debt, then you’ve passed the test and you are still eligible for a Chapter 7 bankruptcy.

If you do have enough disposable income to make payments on debt then you will need to look into Chapter 13 bankruptcy. This kind of bankruptcy will take longer, but it can be more flexible. Chapter 13 bankruptcy can eliminate some of your debts, consolidate some of them and it will make it so you won’t be drowning any more. You’ll have one monthly payment that you can afford.

We’ll help you through the Means Test and beyond.

When you fill out your initial paperwork with us (find it here) we have all the information we need to help you with the Bankruptcy Means Test and we’ll carefully talk you through your options at your free bankruptcy consultation. When you come to us we guarantee you’ll feel educated and empowered. So set up a visit and we’ll get you on the road to recovery.


Leave a Reply

Your email address will not be published. Required fields are marked *