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Do you need to file Chapter 7 or Chapter 13?

Part of the determination on whether you can file bankruptcy -- and which type of bankruptcy you must file -- is made by going through the process of the means test. The means test is standardized by paperwork that has to be completed when you file a bankruptcy petition. This paperwork can seem complex and overwhelming, but experienced bankruptcy attorneys can help you quickly and accurately complete it.

The means test is meant to determine what type of disposable income you have that can be used to pay off creditors. It also takes into account information such as the size of your family, your earnings and the type and number of expenses you are dealing with. First, the means test looks at your income. If your income is below the state's median, you typically qualify to file for Chapter 7. Income is reviewed for the past six months to make this determination.

If your income is above the state median or if you want to file for Chapter 13, you'll have to complete the second part of the means test. This involves gathering information about your expenses for the same six-month time period. Expenses include things such as food, utilities, medical and health care costs, car insurance and other necessary items. After subtracting these expenses from your income, you are left with disposable income. If your disposable income is under a certain amount, you can still file for Chapter 7.

If your disposable income is high enough, you'll have to file for Chapter 13. That means you'll pay some money back to creditors. How much you pay back depends in part on how much disposable income you have, which means all of this paperwork must be completed correctly to ensure an appropriate repayment plan.

Source: Nerd Wallet, "The Bankruptcy Means Test: What It Is, Why It Matters," Sean Pyles, accessed Aug. 12, 2016

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Joshua Z. Goldblum, Attorney at Law
826 Bustleton Pike Suite 101B
Feasterville, PA 19053

Phone: 215-322-2745
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