I’m Not In School — What is this “Means Test” I have to Pass?

27 Jul I’m Not In School — What is this “Means Test” I have to Pass?

If you are looking into bankruptcy you have probably heard about having to “pass the means test”. OMG, you might be thinking, do I have to take a test in order to even file? Where do I get the list of what to study?!? If I fail, can I retake the test?

Don’t worry about being back in school — it’s not like that.  The “means test” was added in 2005 and calculates the amount you would be expected to have available to pay creditors if you were in a chapter 13 “plan” to pay creditors instead of in a chapter 7 “liquidation”.

In other words, it looks at the “means” you are presumed to have that will let you pay some or all of your debts. It’s got some twists and turns and some unexpected outcomes, but it’s just part of what you have to deal with if your bankruptcy is based primarily on consumer debt. You might be required to file a chapter 13 because of how much you have available for creditors (some call this “failing the means test”), but you also might voluntarily choose to file a chapter 13.

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Jay S. Fleischman is a bankruptcy lawyer with offices in Los Angeles and New York. He can often be found on Google+ and Twitter, where he shares information about consumer protection issues and personal finance.
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