What is the Chapter 7 Bankruptcy Means Test?
Are You Eligible For Chapter 7 Bankruptcy? The Means Test Will Let You Know.
If you’re hoping to pursue Chapter 7 Bankruptcy to liquidate your debts in a timely fashion, you’ll first need to take a bankruptcy means test to determine your eligibly. Chapter 7 is designed to help people with low income and high amounts of debt to get a fresh start, while still providing their creditors with some immediate reimbursement. This means that not everyone will qualify, and the means test exists to determine who will.
The Steps to a Chapter 7 Bankruptcy Means Test:
- The Median Test: The first step is a basic comparison of your current monthly income against the Illinois median income level. The median income is calculated by the U.S. Census Bureau and uses the number of dependents in your family as variables. If your monthly income is below the median income in Illinois, then you’ll be eligible for Chapter 7 Bankruptcy without further means testing.
- Means Test Calculation: Even if your monthly income has been determined to be greater than the Illinois median income, you may still have a chance to be eligible. In this step, your income figure may be reduced by deductions which are set both by national or local standard statistics. Some of these deductions include: Taxes, Health, disability, or term life insurance, Secured debt payments, Court ordered payments, Child care, Health care, Education for employment or disabled child, Charitable contributions, Care of elderly, chronically ill, or disabled. If deductions do not adjust income enough to pass the test, than step 3 must be tried.
- Multiply non-priority, unsecured debt by 25%: If your disposable monthly income, multiplied by 60, is less than 25% of the debtors unsecured, non-priority debts, then you will pass the means test under this final revised calculation. If you still fail the means test after these qualifications are included, you can only file Chapter 7 Bankruptcy under very special circumstances.
If you don't pass the means test, you are limited to using Chapter 13 Bankruptcy, which requires you to make monthly payments over a 3 to 5 year period according to a budget monitored by the bankruptcy court. Most people who file for bankruptcy would prefer Chapter 7, which requires no repayment and provides liquidation within a few months.
Determine Your Eligibility for a Bankruptcy Debt Discharge With the Help of a Bankruptcy Attorney in Illinois
Request a Free No Obligation Chapter 7 Consultation Today to see if Chapter 7 is an option for you. Living a debt-free life really is possible after a bankruptcy discharge, and the beginning of the process is to determine your eligibility in a Chapter 7 Bankruptcy means test and see what exemptions you're eligible for. At Suburban Legal Group PC, we can help! Our goal at is to change your financial future, and we provide a reasonable fee and convenient monthly payment plans to help you achieve this. Your initial consultation is free and has no strings attached. You’re under no obligation to pay any fees or move forward with us. It’s truly a win-win!