Kentucky residents like you who are considering filing for Chapter 7 bankruptcy will have a number of steps to go through first. Today, we at Marcus H. Herbert & Associates will discuss what the bankruptcy means test is and why it is crucial to those applying for Chapter 7 bankruptcy.
The bankruptcy means test is used to determine whether or not you are eligible to file for Chapter 7 bankruptcy. It examines key points of information like the size of your family, your various sources and amounts of income, and the expenses that you may make in a given day. They use this to determine how much disposable income you have.
You must have a certain amount of disposable income to be considered capable of repaying your debts. They will also compare your income to the state’s median income and gather documentation proving your expenses over the last six months. Medical costs, groceries, rent, and other similarly crucial things are categorized as “allowable expenses”. Everything else is considered disposable income. Fortunately, most people hoping to file for Chapter 7 are able to pass the bankruptcy means test.
There are other options for those who don’t qualify, as well. Chapter 13 bankruptcy is available for those who don’t pass the test, or for anyone who decides that they would like to retain assets instead of liquidating them.
If you have any other questions about bankruptcy, the process of filing, or different types of bankruptcy, then consider taking a look at our web page on bankruptcy, linked here.