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What Is the Means Test in Bankruptcy?

In 2005, the United States enacted the Bankruptcy Reform Act. Under the new guidelines, the courts are able to make a determination about whether or not you would be able to afford payments under a reorganization of your debt – in accordance with a Chapter 13 filing.

One of the largest differences between Chapter 7 and Chapter 13 protections is that, with Chapter 7, most of your debts are discharged. Under Chapter 13, you get to live in much the same way you’ve become accustomed – keeping your house and vehicles – and you pay back your debt over a longer period of time.

The Bankruptcy Court uses the Means Test to determine whether or not your income is too high for the Chapter 7 threshold. There are many variables to this calculation. Essentially, the test determines if your income is higher than the average income for people living in your county. If your income is determined to be too high for Chapter 7, you would have to file for Chapter 13 protection instead – still having to pay down your debts but at a slower rate.

It’s important to have an experienced lawyer by your side protecting your interests at all stages of the bankruptcy process. Joel R. Spivack, Esq. has been helping people in Cherry Hill, NJ, and the surrounding communities for more than 20 years – guiding them through bankruptcy and helping them get their financial life back on track. Contact the Law Office of Joel R. Spivack today for a free consultation about your situation. Call 866-488-2196.