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What is the Means Test?

Posted on in Bankruptcy

The courts use the Means Test to determine if a debtor has enough means (income, etc.) to repay his or her debts. If the court decides that the debtor can repay those debts, the debtor is forced to file for Chapter 13 bankruptcy, also called a reorganization.

If a debtor does pass the means test, then he or she is allowed to file for Chapter 7 bankruptcy, also called a liquidation. The debtor's assets are sold by a trustee to repay his or her debts and the remaining debts are forgiven. In order to qualify for Chapter 7, the Means Test sets out specific guidelines.

A debtor whose income falls below the state's median income does not have to worry with the Means Test; he or she automatically qualifies. If a debtor has a significant amount of disposable income, they will likely be forced to file under Chapter 13. Even if the debtor has a regular, relatively high amount of income, they may qualify under Chapter 7 if they have large debt payments, such as mortgage payments. There are several “means calculators” available on the Internet to give you a general idea if you could qualify under the means test, but to be sure, you should contact a bankruptcy attorney about your case.

The Means Test is a way to keep wealthy individuals from filing Chapter 7 when they can well afford to file under Chapter 13. Chapter 7 is designed to aid debtors of lower income levels to get a fresh start. If you are considering filing for bankruptcy, contact one of our knowledgeable Illinois bankruptcy attorneys today to find out how to get your own relief from debt.

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