Is there a Means Test if I file a Chapter 13 bankruptcy?

If you are considering filing bankruptcy, it is important to know both the chapter 7 and chapter 13 rules. Chapter 13 is the type of bankruptcy that most people file, as a result of changes to the bankruptcy code that were made in 2005. One of the major changes that came up as a result of these changes to the bankruptcy code was that it became harder to file a chapter 7. Under the current rules, if you want to file a chapter 7 (total liquidation) bankruptcy, you must pass a means test or make less than the median income where you live.

A means test looks at:

• Your income
• Your obligations
• Your debt

This determines if you have any money to service your debt after you pay the required minimum monthly expenses you have. If you do have money left over to put towards your debt (the exact amount can vary, but usually if you have an extra $100 a month or if you have 25 percent of your income available), then you will not be eligible for chapter 7.

Chapter 13, however, is a different story. Chapter 13 is commonly called a wage earners bankruptcy, and the reason for that is that there is no means test. Even if your income is high, you can still qualify for a chapter 13 bankruptcy filing. This is a major benefit to chapter 13 since it is less restrictive. Another benefit of filing a chapter 13 over a chapter 7 is that there is no bankruptcy sale of assets, so those with a lot of possessions may be more interested in a chapter 13 than a chapter 7.

To determine what chapter of bankruptcy is right for you and to determine your eligibility for a chapter 7, you should strongly consider speaking with an experienced lawyer.