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Take the means test to see if you qualify for Chapter 7 relief

Are you drowning in debt? If so, you are not alone. There are quite a few Pennsylvania residents in the same boat as you. Like many of them, you are probably wondering what you can do about it. There are various debt relief options out there; Chapter 7 bankruptcy is just one of them. If you think this type of bankruptcy may be a good fit for you, you need to take the means test to see if you qualify.

The means test is nothing to stress about. There are no wrong answers. It really is just a form used to compare your income level to the state's median income level. If your income is above the state median and you have sufficient disposable income after paying your basic bills, you fail. If your income is above the state median and you lack sufficient disposable income, you may pass. If your income is below the current state median income level, you pass.

What you need to take the means test

Before taking the means test, you need to gather roughly six months' worth of income statements. This test will take changes in income over that time period into consideration in order to determine if you qualify. Reports state that only 12% of people who take this test fail it initially -- this does not mean Chapter 7 is out of the question for them.

Means test part two

If your test results show that your income should be sufficient to cover your debts, you can dig into your finances a little deeper in order to determine if Chapter 7 may still be an option. Income is not the only factor here. As stated above, disposable income matters. After you pay for the things you need, how much do you have left at the end of the month? Courts deem the following allowable expenses:

  • Food
  • Clothing
  • Shelter
  • Medical expenses
  • Transportation costs

If, after meeting these basic obligations, you have nothing or very little left to apply toward your debts, regardless of your income level, you may file for Chapter 7 relief.

What happens if you do not qualify or the court fails to approve your petition?

If you do not qualify for Chapter 7 bankruptcy or the court fails to approve your petition, this does not mean bankruptcy protection is out of reach; you have options. You can look into pursuing Chapter 13 relief, or you can wait and file for Chapter 7 relief again at a later date, among other things. Legal counsel can review the specifics of your situation and help you decide how to proceed.

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