Using The Law To Make Your Life Better

What do you need to know about the "means test" and bankruptcy?

David Sexton

Many of our readers in Tennessee have heard the phrase "Ask and you shall receive," but that doesn't necessarily apply when it comes to filing for bankruptcy. Under the requirements of Chapter 7 bankruptcy - also known as a liquidation bankruptcy - a potential filer must pass a "means test." So, what do our readers need to know about the means test when they are contemplating the pros and cons of filing for bankruptcy?

Well, for starters, the basic point of the means test is to determine whether or not the potential filer actually earns enough income to be applied toward debt obligations. Although there are exceptions and special circumstances when it comes to the means test, in essence, a person's most recent income over a period of time before filing for bankruptcy cannot exceed the state median income. If it does, the potential Chapter 7 bankruptcy filer may need to consider Chapter 13 bankruptcy instead.

But, like calculating income for taxation purposes, sometimes there are deductible expenses that will not count toward the income calculation. When it comes to sources of income, however, almost all sources are counted.

Filing for Chapter 7 bankruptcy can be relatively straightforward for many people who have a source of income that is simply never going to be enough to allow them to pay off their debt obligations. Any Tennessee residents who are thinking about the benefits of filing for bankruptcy will likely benefit from getting more information about their own unique financial situation.

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