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Learn about the means test for Chapter 7 bankruptcy

One of the more popular options for Michigan consumers seeking a fresh financial start is Chapter 7 bankruptcy. You may have heard that consumers wishing to file for Chapter 7 bankruptcy must pass a means test. What is the means test? This blog post provides some basic information on what the means test is and how it could affect your filing for Chapter 7.

The means test consists of two steps. The first step is a comparison of the consumer's income with the median income in the consumer's state. Specifically, the bankruptcy court computes the consumer's average monthly income during the six-month period before the Chapter 7 bankruptcy petition was filed. This figure is then compared with the median family income for the consumer's state of residence. If the median family income in Michigan is greater than or equal to the consumer's income, the consumer will be allowed to proceed to the second step of the means test.

The second step of the means test is to determine whether the specific consumer in question could make payments under a Chapter 13 repayment plan. First, the bankruptcy court will subtract allowed expenses from the consumer's income. Once these subtractions have been made, if the remaining income is sufficient to pay at least a portion of the consumer's unsecured debt, the consumer is not eligible for Chapter 7.

Even if a consumer does not pass the means test, consumers are allowed to explain any special circumstances that exist to the bankruptcy court. The special circumstances should explain why the consumer's income should be recomputed to a lower figure by the court. If the court goes along with the consumer's argument, the consumer will be allowed to submit adjusted income figures for use in the means test.

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    Posted by MaryDecember 11, 2015

    "I am overwhelmed by your response to my call, even 10 years after my bankruptcy was discharged. You have more knowledge and expertise than I could have imagined. Because of you, my fears have been put to rest. For that, I'm so very grateful. Thank you many times over. "

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    "... I was extremely impressed with Charles' understanding of the bankruptcy laws to the extent that I felt certain that my best interests were always at the forefront. "

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    Posted by MarleneJanuary 8, 2014

    He helped me thru my 1st bankruptcy and now the second. I had no idea what to expect , but they kept me informed and answered all my questions. Mr. Schneider is the most experienced and knowledgeable lawyer I have ever met. If you have to file call this attorney first!

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