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Means testing determines bankruptcy filing options

While many Pennsylvania residents understand that financial pressures can become burdensome, there are certain restrictions in filing for Chapter 7 bankruptcy as a way to obtain a fresh financial start. Income and household expenses are evaluated to determine whether Chapter 7 is appropriate or whether it would be an abuse of the financial system. Means testing is an important element of filing for bankruptcy, and forms must be filled out accurately and submitted with the petition.

An individual will enter personal data, using provided charts and tables to determine amounts to enter for various allowable expenses. These include housing allowances that are determined by the petitioner's residence. These also include projected vehicle expenses based on the number of vehicles and the ownership status. Allowances are made based on the number of members in a household for anticipated out-of-pocket healthcare costs and for normal needs such as food, clothing, and services. The median household income is also used, gathered from a current table maintained by the U.S. Census Bureau. In some cases, actual expenses may be considered as well.

If a household meets the requirements for filing for Chapter 7 debt relief, the action will proceed, eventually resulting in the discharge of allowable debts. Some debts may not be discharged regardless of the form of bankruptcy used, and other debts might be reaffirmed in Chapter 7 if an individual wishes to maintain possession of certain secured items. Although an individual might qualify for Chapter 7, it is possible to file for Chapter 13 instead if there is a desire to retain certain assets.

If bankruptcy forms seem confusing or complicated, an individual considering filing might seek guidance from a bankruptcy lawyer. This may be important as questions are addressed about the type of bankruptcy. Incorrect information could result in unanticipated results such as a debt being forgotten on the paperwork. A professional review may help in avoiding such mistakes.

Source: The United States Department of Justice, "Means Testing", October 19, 2014

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