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Understanding the bankruptcy means test

If you are giving some thought to filing for bankruptcy, you may be wondering about the bankruptcy means test, and what it means and entails. Essentially, the bankruptcy means test determines whether you will be able to move forward with a Chapter 7 bankruptcy, if preferable, or if your only option is to file for Chapter 13 bankruptcy.

There are benefits and drawbacks associated with both types of bankruptcy filings, but determining which bankruptcy process to follow is an important first step in regaining control over your finances.

What the bankruptcy means test involves

If you undergo a bankruptcy means test, the first step involves determining whether your household income over the last six months falls below the median income in place in Mississippi. If you have lost or taken on a new job within the last six months, you can expect that the income changes will factor in when determining whether you can proceed with a Chapter 7 bankruptcy. If your income falls below the median threshold in place in Mississippi, you automatically pass the test and can move on with your Chapter 7 filing.

If you do not pass the means test during the first step, the second step involves gathering documentation regarding all expenses you had in the last six months. Once you take into account expenditures for food, rent, medical bills and so on, any money left over is disposable income that you should reasonably be able to put toward your debt. If your amount of disposable income is below a particular level, you may still be able to proceed with a Chapter 7 bankruptcy.

If you really want to file for Chapter 7 bankruptcy but you do not pass the means test, you may wait six months and then try again. If you cannot wait another six months to file, your best bet may be to proceed with a Chapter 13 bankruptcy.

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