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Can you explain in basic terms what a chapter 7 means test is?

Few elements of a chapter 7 bankruptcy cause more confusion than the means test. The test also causes many people to feel anxious about the outcome. While the test is a very important part of determining chapter 7 eligibility, it seems more complicated than it really is. However, you should know upfront how crucial it is to complete the test accurately. Failure to do so could mean that you will not be able to file your bankruptcy under chapter 7, which is typically the most beneficial for those who cannot pay their debt.

The means test exists to prevent those who truly can pay off at least some of their debt from filing under chapter 7. In other words, it was put into place to curtail the abuse of filing bankruptcy. After all, chapter 7 offers the possibility of having some of a person's debts completely discharged. This makes it an attractive option, even for those who may have some disposable income they could use to pay some of their debts.

The means test works like this: First you must find out what the median income is in Pennsylvania. Because this figure is subject to change, you should make every effort to know what the current median is. A bankruptcy attorney is one of the best sources of up-to-date information required for the means test.

Second, you will have to determine your current monthly income. If your monthly income is less than the state's median, you can probably move forward with your chapter 7. If your monthly income is more than the median, you will have to participate in further testing.

These are the basics of the bankruptcy means test for chapter 7. Before moving forward, you should know that consulting with a lawyer can ensure your chapter 7 bankruptcy proceeds as smoothly as possible.

Source: U.S. Department of Justice, "Means Testing," accessed July 05, 2016

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