If you plan to file for Chapter 13 bankruptcy, you won't need to take the "means test" used to determine Chapter 7 bankruptcy eligibility in the traditional sense. However, people who file for Chapter 13 go through a similar income means test to determine how long their Chapter 13 repayment plan will last and the amount of disposable income they have to pay creditors.
Also, filers must meet other Chapter 13 bankruptcy eligibility criteria. For instance, your debts can't exceed current limits, you must be able to pay everything required by the Chapter 13 payment rules, and more.
The Chapter 7 bankruptcy means test determines if you have enough income to repay some of your debts through a Chapter 13 bankruptcy repayment plan. It's a two-part test. If your gross income doesn't exceed your state's median income for a similar family size, you pass and don't need to take the second part.
However, suppose your income is higher than your state's median income. In that case, you'll have another opportunity to pass the Chapter 7 means test. You'll deduct allowed expenses from your gross income. If you don't have enough remaining to pay creditors through a Chapter 13 plan, you'll qualify for Chapter 7.
If you fail the means test because you have more income than the law allows, your Chapter 7 filing is presumed abusive. You won't qualify for a Chapter 7 discharge unless you show otherwise.
One of the reasons your income is important in Chapter 13 bankruptcy is because it determines the length of your repayment plan. If your income is less than your state's median income, your repayment plan will probably last three years. If your income exceeds your state's median income, your repayment plan will probably last five years.
But you'll need to meet another income requirement. Most potential Chapter 13 filers aren't concerned with income that is too high, but whether they have enough income. If you can't fund a repayment plan, you won't be eligible for Chapter 13.
Here are a few Chapter 13 requirements you'll need to meet:
Bankruptcy is essentially a qualification process. The laws provide instructions for completing a 50- to 60-page bankruptcy petition, and because the rules apply to every case, you can't skip a step. We want to help.
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