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Understanding the Chapter 7 means test

It is easy to think that you are unique in your struggles with debt. This may prompt you to shy away from seeking advice and assistance from others in Jackson due to the perceived stigma associated with financial troubles. Many clients have come to us here at the Pond Law Firm with the same assumption only to be surprised to discover that many people grapple with the same issues. Just as you are not alone in dealing with debt, you are also not without ways to overcome it. After evaluating your options, you might just discover that a Chapter 7 bankruptcy gives you your best chance at re-establishing yourself on firm financial footing. 

Yet first things first: You must first determine whether you qualify to file for a Chapter 7 bankruptcy. Many mistakenly believe that people are allowed to abuse bankruptcy in order to emerge unscathed from a series of poor (and deliberate) financial decisions. However, the federal government has come up with a method to prevent potential abuse: The Chapter 7 means test.

According to the website for the United States Courts system, the means test is applied to your case only if your current monthly income exceeds the state median for your particular demographic. If it does, then the court will project your aggregate monthly income over the next five years. Certain allowed expenses (e.g., your monthly mortgage payment) are then subtracted from that amount to come up with your disposable income. If that amount is more than $12,850, or greater than 25 percent of your non priority unsecured debts (up to $7,700), then you may not qualify. That does not necessarily mean that bankruptcy is not an option, however; you still may get the same protection through a Chapter 13 case. 

More information on Chapter 7 eligibility requirements can be found here on our site.  

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Pond Law Firm
1650 Lelia Drive Suite 101
Jackson, MS 39216

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