For Pittsburghers who are facing overwhelming debt and do not have property they want to retain, a Chapter 7 bankruptcy liquidation is the easiest and fastest way to clear debt and get back on stronger financial footing. However, there are basic requirements when filing for Chapter 7. One is the means test. Understanding what the means test is and what steps must be taken is critical to a case.
The means test is used to determine if a debtor qualifies for Chapter 7. The bankruptcy court will first examine the debtor's monthly income for the six months prior to filing. This income will be compared to the state's median income for a family. If it is less than or equal to the median income, then the person can file for Chapter 7. If not, then the next option is to file for Chapter 13. All forms of income will be calculated, including wages, salary, bonuses, commissions, dividends, interest, child support, spousal support, unemployment, pensions, workers' compensation, annuities and more. Tax refunds, Social Security retirement, Social Security disability and Temporary Assistance for Needy Families are excluded.
Next, a debtor who earns more than the median income for the state must assess how much disposable income they have after the allowed expenses are factored in. If they do not have enough to afford the payments for a Chapter 13 repayment plan, then the debtor will have passed the second step for the Chapter 7 means test. If they do have enough to make the Chapter 13 payments, then the only option is to file for Chapter 13.
The means test is just one consideration when filing for Chapter 7 bankruptcy. A person who is having financial problems and is thinking about using Chapter 7 to improve their situation will have many questions about the process. A law firm that helps those thinking about Chapter 7 bankruptcy should be contacted for a consultation.