Nothing to Fear

When people with debt trouble turn to the bankruptcy options -- either Chapter 7 bankruptcy or Chapter 13 bankruptcy -- they are often intimidated by the prospect of having to be subjected to a bankruptcy means test.

Ensure Eligibility

In reality, it seems the Chapter 7 means test is meant to ensure people with debt trouble do not file for the wrong type of bankruptcy protection. For many, being able to retain control and ownership of valuable and necessary assets, such as a home or vehicle, is vitally important. The Chapter 7 means test, therefore, aims to promote Chapter 13 bankruptcy as an alternative to a liquidation under bankruptcy.

Median Income

As well, the Chapter 7 means test will evaluate an applicant's ability (or lack thereof) to repay debt. The Chapter 7 means test will measure an applicant's income against state or regional median income levels. When actual income far exceeds median levels, the Chapter 7 means test will need to be met another way.

Approved Exemptions

In realizing the intention of the Chapter 7 means test, many people then become fearful that they will not "meet" the standards, particularly if their income exceeds the median income or if their expenses outweigh those maximum exemptions permitted by the IRS. With this in mind, applicants are given multiple ways to meet the Chapter 7 means test. In some cases, applicants will need to provide additional information.

Do Not Fear The Chapter 7 Means Test

As outlined above, the intention of the Chapter 7 Means Test seems to be to ensure applicants are filing for the right type of protection. In that sense, the means tests is really to protect applicants and, specifically, their rights to retain specific assets in bankruptcy.

Applicants are encouraged to familiarize themselves with the different forms that comprise the Chapter 7 means test.