Before you can file your Chapter 7 bankruptcy petition, you must first qualify for filing under that chapter. Think of the means test as the dividing line between those whose indigence prevents them from meeting their financial obligations and those who simply don’t want to pay their debts.
Below is some important information about the means test and whether you will pass it to file for Chapter 7 bankruptcy.
There wasn’t always a means test
If you ever filed for bankruptcy prior to 2005, you would not have had to pass a means test to file for Chapter 7. That was the year that the Bankruptcy Abuse Protection and Consumer Protection Act (BAPCPA) was passed by Congress and signed into law.
This law was intended to make it more restrictive for debtors who could pay their debts to get them discharged by filing for bankruptcy.
What is measured in the means test?
The court examines each debtor’s ability to pay off their debts by comparing income, expenses and what they owe. If it’s possible for these debtors to pay down their debts over a period of years, the court can deny them the right to file under Chapter 7 because they failed the means test.
That doesn’t mean that they are denied the relief bankruptcy offers. They just must file for a Chapter 13 debt reorganization bankruptcy instead.
What’s best for you — Chapter 7 or 13?
Most debtors find the clean slate of a Chapter 7 bankruptcy after approximately 90 days to be more appealing than the structured repayment program of a Chapter 13, which can last from three to five years.
There is no harm in looking into filing a Chapter 7 bankruptcy. If you can pass the means test, this is a good way to turn over a new financial leaf. If not, your legal team can guide you towards your next step.