Beebe and O'Neil

Breaking down the Chapter 7 means test

Once you make the decision to pursue a personal bankruptcy, the next task is determining which case you should file under. Many come to us here at Beebe & O'Neil wanting to file under Chapter 7 due to the advantage it offers of having debts discharged. Indeed, Chapter 7 is by far the most popular form of personal bankruptcy (both in Norwich and throughout the rest of the U.S.). Yet you might be shocked to discover that are not eligible to file for Chapter 7. That is because the federal government does not want people to abuse the protection that bankruptcy offers. 

Thus, a means test has been created to determine if you qualify to file bankruptcy under Chapter 7. Per the website for the Federal Judiciary, the first step is determining your current monthly income. If yours falls below the median for your particular demographic in Connecticut, you qualify. If it is above the median, then the means test is applied. 

Your current monthly income is projected out over a period of five years. If that amount is greater than $12,850 or more than 25 percent of your total nonpriority unsecured debt (provided that amount is more than $7,700), then you cannot file for bankruptcy under Chapter 7. 

You can still seek bankruptcy protection even if you do not pass the Chapter 7 means test. You would just need to convert your case over to a Chapter 13 bankruptcy. Called a "wage-earner" bankruptcy, a Chapter 13 case allows you to create a debt repayment plan to settle all of your liabilities over a period of 3-5 years. The same protection from further creditor action is still in place as you follow your Chapter 13 repayment plan. 

You can learn more about preparing to file for bankruptcy by continuing to explore our site. 

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Beebe & O'Neil
PO Box 6002
335 Washington Street
Norwich, CT 06360

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