Financial difficulties can happen to anyone. And when they do, they can push your resilience, patience and even sanity to the edge. Declaring Chapter 7 bankruptcy can bring an end to these challenges.
However, before filing your Chapter 7 Bankruptcy, you must qualify. One of the tests you must pass is the “means test.” This test is used in combination with other factors to assess your eligibility for Chapter 7 bankruptcy.
Understanding the mean test
The means test assesses your income, debts, assets (like real estate and vehicles), expenses and the size of your household to determine whether you qualify for Chapter 7 bankruptcy. If your income is lower than Texas’ median income, then you may file for this chapter.
What the means test calculates
The means test aims to establish your disposable income. The higher your disposable income, the more difficult it will be to qualify for Chapter 7. Several calculations can give you a clearer idea of what makes up your disposable income. Working with a bankruptcy expert will help you understand exactly how the bankruptcy court will establish your disposable income.
So what happens if you fail the means test?
Failing the means test does not completely lock you out of bankruptcy. Rather, it simply means that you may not file Chapter 7 at the moment. That said, you can still file Chapter 13 and reorganize your debts. It also means that you can adjust your debt and income situation to boost your likelihood of passing the means test at a later date.
If you are going through hard financial times, you may feel hopeless. Fortunately, Chapter 7 bankruptcy can give you the relief you need to get back on your feet, financially speaking.