The goal of the means test is to prevent abuse of the bankruptcy process by individuals who can actually repay creditors through a Chapter 13 reorganization plan. There is a debate by bankruptcy attorneys nationwide as to why this has not worked. Nonetheless, the means test is a requirement to determine if a debtor qualifies for liquidation under Chapter 7 bankruptcy, or a reorganization of debts through a Chapter 13 plan.
The first part of the means test looks at the debtors income six months prior to filing the bankruptcy. If the debtor’s income is less than the state median income, they qualify for Chapter 7 bankruptcy.
If the debtor makes more than state’s median income than the second part of the means test is necessary to complete. If after deducting expenses, the debtors disposable income is high enough to pay unsecured creditors than the debtor can pay through a Chapter 13 reorganization plan.
If you have any questions regarding the means test contact an experienced bankruptcy lawyer at Sky Law Group today!
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