What is the Means Test?

As you begin to consider bankruptcy, you’ll need to familiarize yourself with the basic procedures and some new terminology. I’m here to walk you through the process and make sure you know what to expect each step of the way. I’ll give you an overview of the requirements and consequences of each type of bankruptcy, and together we’ll come up with a plan to get you back on your feet and working toward a more successful financial future.

Finding the Best Fit

Once you’re ready to get more information about how bankruptcy can help you, just give me a call. We’ll take some time to get to know each other, and one of the first things we’ll do is conduct the Means Test, which will help us decide which type of bankruptcy best fits your situation. Using your income, debt, assets, and living expenses, we’ll calculate your disposable income. If this test indicates that you do not have the “means” of paying off your debt in a reasonable amount of time, you pass the test and are eligible for a Chapter 7 bankruptcy.

Chapter 7

Chapter 7 bankruptcy has been designed for people who truly cannot pay off the money they owe and would spend years enslaved to debt, whether due to low income or crushing amounts of debt. A Chapter 7 discharges many types of unsecured debt, such as credit cards, medical bills, personal loans, and utilities. Child support, alimony, and back taxes generally cannot be included in bankruptcies. Depending on the specifics of your situation, you may or may not be able to keep your property. If you want to keep your car or home, I recommend staying up to date on payments and keeping the property insured. On the other hand, if you’ve gotten into a payment that you can no longer afford, a Chapter 7 can be a relief from those overwhelming bills.

Chapter 13

If you don’t pass the Means Test, or even if you do but have property you’d like to protect, a Chapter 13 might be the best option for you. Chapter 13 was designed for people who can’t keep up with their current debt, but possibly could if the payments were restructured and lowered for a period of time. Using your income and debts, you are put on a 3-5 year repayment plan, during which you make affordable, reduced payments on your debt. At the end of your repayment period, most of the remainder of your debt is discharged. Many people falsely believe that a Chapter 13 requires you to pay off your entire debt. The reality is that consumers pay just a fraction of what they originally owned, while getting to keep their property.

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