The bankruptcy means test looks at your income for the six months before you filed for bankruptcy. The government is trying to get an idea of what level of income you really have and what type of financial solutions are possible.
If you “pass” this test and qualify for Chapter 7 bankruptcy, it means that you have a very low income or you perhaps do not have any income at all. That’s because Chapter 7 bankruptcy is liquidation bankruptcy. You get to keep exempt assets, but you have to sell non-exempt assets to cover a portion of the debt. The remaining debt is then forgiven.
What if you fail the means test?
Not everyone passes the means test. The government may decide that you simply earn too much money to file for bankruptcy.
That doesn’t mean that you have no options, however. It just means that you can’t use Chapter 7 bankruptcy. You may still be able to use Chapter 13. This is known as wage earners bankruptcy, and it sets up a repayment plan. This system is specifically designed for people in your situation, where you do have an income but you just need to restructure your debt so that it is affordable. Repayment plans generally last for three to five years.
Considering all of your options
Financial issues can certainly be stressful and complicated. Take the time to look into all of your legal options so you know exactly what steps to take. Remember that there are solutions for everyone. The key is just to determine what is going to work best in your situation.
