The bankruptcy means test is when the courts examine the average income of the debtor for six months prior to the time they filed the claim. It is then compared to the average income for the state that the claim is being filed in. If the filer’s income is below the state average the option for filing chapter 7 bankruptcies still exists. If the income is above the average the rest of the bankruptcy means test has to be completed.
When the income is more than the state average the debtor’s income is taken and the living expenses that are not included in the bankruptcy are deducted. This amount is then multiplied by sixty in order to get the projected income for a five year time frame for the repayment of these debts.
When this is done if the available income for the five year time frame is over ten thousand dollars a Chapter 13 bankruptcy filing will be required. This means that anyone earning more than the state average with over $166 dollars of income available each month will be automatically denied Chapter 7.
When you are above the state average for income, but have less than $166 dollars a month to pay to your debt another part of the means test must be applied. When the available income is less than $100 a month Chapter 7 bankruptcy is again considered an option. The debt is measured against the income at 25% when the income is between $100 and $166.
If the income is above the average and you have debt that is above 25% of your available income for a five year period you are required to file Chapter 13. When the debt is below 25% of your available income then you can still file Chapter 7.
The bankruptcy means test will tell the court which chapter of bankruptcy that you should file. Mean test enables the court to decide on the chapter to file on and will also prevent the debtors to misuse the chapters for their own benefits. Such test is a good measure and a fair treatment for both the debtors and the creditors.
For more information please visit: http://www.floridalawattorney.com