Jeffrey M. Rosenblum, P.C.
A Fresh Start

Want to file for Chapter 7? You'll have to take the means test.

It is not easy to come to the realization that filing for bankruptcy is probably your best choice. This decision likely comes after months or years of financial hardship brought about by things like medical issues, job loss, divorce and more. While it is probably not something you imagined doing, filing for bankruptcy can actually be a smart way to regain your financial footing.

Chapter 7 bankruptcy is a popular choice for individuals who are seeking relief from unsecured debt, such as medical bills and credit card debt. Many people prefer this choice because it takes less time to complete; however, not everyone is eligible. In order to file for relief through Chapter 7 bankruptcy, you must first take the means test.

What does the means test measure?

The means test is the way by which a person can know whether he or she is eligible to move forward with a Chapter 7 bankruptcy filing. It looks at a person's income, assets, liabilities and other factors. The steps of the means test are as follows: 

  • Step 1 – This is the part of the test that takes into account a person's income. Income is much more than what you bring home on your paycheck and includes assets such as tips you earned at work, gross income from a business, interest, royalties, child support, unemployment compensation and much more.
  • Step 2 – After completing Step 1, a person may have to move on to the second step if he or she earns more than the state's median income. This step will deduct all expenses and financial obligations a person has.

If after completing the second step it is clear you earn enough to pay at least some part of your debt through a payment plan, you will not be eligible for Chapter 7. This is not the end of the road for you; you may choose to file for Chapter 13 bankruptcy.

The best financial future for you 

Through bankruptcy, you can deal with your debt and move forward to a better financial future. Before you move forward with your application, it is beneficial to first learn more about the means test and eligibility requirements for Chapter 7. A complete assessment of your case with a New York bankruptcy attorney can help you understand which bankruptcy option is ideal for your situation and for your future interests.

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