What is a Bankruptcy Means Test?

A Chapter 7 bankruptcy is a liquidation bankruptcy. With this form of bankruptcy, property that is not exempt would be turned over to a bankruptcy trustee. In most cases, there is little to no non-exempt property to surrender to the trustee. However, if there is non-exempt property, the trustee would be required to sell the property and use the proceeds to pay back as much of the debt as possible. We should point out the fact that debts are prioritized, and unsecured debts, like credit cards and unpaid medical bills, are looked upon as non-priority debts.

 

A Chapter 7 bankruptcy can be a potential solution for people who do not have enough disposable income to pay down all or some of their debts over time. To determine whether or not a person is qualified for Chapter 7, a means test is administered. We have offices in Portland, Eugene, Medford, Salem, and a number of other cities in Oregon, and we also have locations in the state of Washington. If your income is below the median income in your state of residence, you would automatically pass this means test, and you would qualify for a Chapter 7 filing.

 

You are not automatically precluded from Chapter 7 eligibility if your income exceeds the median income in your state. There is a formula that is utilized to measure an applicant’s ability to use his or her disposal income to adhere to a payment plan over a three-year or five-year period. If you have very limited income left after your basic life responsibilities are met, you may still be able to qualify for a Chapter 7 bankruptcy filing.

 

All is not lost if you cannot file for a Chapter 7 because you cannot pass the means test, because a Chapter 13 bankruptcy can be a viable alternative. If you would like to discuss your options with a knowledgeable member of our team, our doors are open. We can get to know you, gain an understanding of your situation, and make the appropriate recommendations. To schedule a free consultation, send us a message through our contact page and we will be back in touch with you shortly.