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How does a means test determine Chapter 7 eligibility?

On Behalf of | Oct 1, 2015 | Chapter 7

If you are considering a bankruptcy in Oregon, you may wonder whether a Chapter 13 or Chapter 7 bankruptcy would be more appropriate. One factor that will help identify your options is the means test. The means test essentially is a comparison of your debt and expenses against your income to see if you qualify under Chapter 7 for a full discharge of your debts.

The Internal Revenue Service identifies living expenses as those costs associated with food, clothing, housing and utilities. Therefore, a mortgage or rent payment would fall under expenses. The courts usually determine debt to include credit cards, car loans, and other financial obligations. The means test assesses your need for debt relief based on your family size, your living expenses and the source of your debt.

The test requires you to submit your gross income, before you filed for bankruptcy protection, for the previous six months. Wages, retirement payments and unemployment or workers’ compensation are some examples of income that must be included on the means test form. If you are on Social Security Disability benefits or some other assistance program, you do not have to include those payments.

It should be noted, that the court is aware you may have undergone a change recently that may not accurately reflect your income history. For example, you may be on a long-term medical leave of absence or you may have lost your job.

If the court determines you are able to pay all your debts and living expenses with your current income, your case for Chapter 7 may be dismissed, but a Chapter 13 bankruptcy may still be an option to provide relief from wage garnishment or creditor harassment. This information is not intended to be taken as legal advice, and is provided for educational purposes only.


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The Law Office of Kim Covington is a debt relief agency, and I have helped families, individuals and small businesses, file for bankruptcy relief under the U.S. Bankruptcy Code, for over 22 years.