Overwhelming debt is a heavy burden that no one should have to deal with
alone. Whether you are the head of a large company or an individual trying
to make it by in a tight economy, you deserve to be able to seek some
sort of relief from your financial troubles. For many people, this means
filing for bankruptcy to absolve themselves of unsecured debts.
This solution cannot be utilized by everyone, however. In order to file
for bankruptcy, you must first take what is known as the Chapter 7 means
test – or sometimes just the means test.
How Does the Means Test Work?
As the purpose of the means test is to determine eligibility for bankruptcy
filings, it requires a close examination of all your finances. To put
it simply, it is meant to determine if you are actually under overwhelming
debt or not. Through extensive cataloguing of at least six months’
worth of records, you will need to compile information that outlines:
- Your monthly income
- Your overall unsecured debt
necessary monthly spending
What Do the Results Indicate?
When done correctly, the means test will give you a numerical result of
your possible yearly income and how much someone in your living situation
needs to spend to get by without undue discomfort. That result will be
compared to the median monthly income of a household of your size in your state.
Pass: If your outcome is
lower than the median, you have passed the Chapter 7 means test. This will allow
you to file for Chapter 7 bankruptcy – a way to eliminate all your
uncharged debt. You will, however, be putting your assets at risk of collection.
Fail: If your outcome is
higher than the median – meaning you make more than the average person
in your situation – you have not passed the means test. This does
not mean you cannot file for bankruptcy, though; it simply means you cannot
file for Chapter 7. You might still be eligible for Chapter 13 –
restructuring your debt for easier payments over the course of several years.
Ultimately, if you want to know more about the means test and your financial
relief options, you need to speak to a professional attorney. At The Pritchard
Law Firm, our Fort Worth bankruptcy lawyer can sit down with you and discuss
all of your available options. By helping you with the means test and
analyzing your finances together, we can determine if bankruptcy really
is the right choice.
It all starts with a
free consultation with our team. Call today.