The Means Test

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The Chapter 7 means test is a formula applied to determine whether or not the consumer should have enough money available to make some minimal payment to creditors in a Chapter 13 bankruptcy.

The calculation can be complex, not only because of the numerous steps that may be involved, but because it requires an understanding of the rules concerning how your income is calculated for means test purposes and which debts are classified as unsecured and non-priority.

Most people who want to file for Chapter 7 bankruptcy find that they are still eligible to do so.

It is a two step process:

1 - Median Income Comparison

The first step in the Chapter 7 bankruptcy means test is simple: it compares your income to the median income of a Florida family the same size as yours.

If your income is higher than the median income, it doesn't necessarily mean that you can't file for Chapter 7 bankruptcy; it just triggers the second step in the test.

2 - Calculating Disposable Income and Unsecured Debts

The second step is a bit more complicated. Your "disposable income" needs to be calculated, itself. Certain allowable expenses (determined by IRS guidelines) are subtracted from your income to find your "disposable income." Depending upon what this number is will determine if Chapter 7 is right for you.

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