A key part of filing for Chapter 7 bankruptcy in Mississippi is passing the means test. The means test is a two-part test to determine whether you qualify for bankruptcy relief. In other words, can you afford to repay your debts with the amount of disposable income you have?
The means test has two parts, but the vast majority of people only need to pass the first part to qualify for Chapter 7 bankruptcy. If you are filing for bankruptcy mainly because of a business you own, you do not need to pass the means test.
Part 1: Is your household income below the median?
If your household income for the past six months fell below the median income in Mississippi, you automatically passed the means test and do not need to proceed to the second part. Changes in income will be taken into account in the first part of the test, so you may still pass if you recently lost your job after earning a high income.
Part 2: Do you have any disposable income to repay your debts?
You may still be able to qualify for Chapter 7 bankruptcy relief if you fail the first part of the means test. A person with a high income could have no disposable income left to repay debts after their expenses. Passing the second part of the means test is much more involved, as you will have to gather evidence of all of your allowable expenses, including:
- Medical expenses
What to do if you fail the means test
If you pass the means test, you qualify for Chapter 7 bankruptcy relief and can proceed to the next phase. If you fail the means test, you may still be able to file for Chapter 13 bankruptcy, which could allow you to restructure your debts.
Depending on your situation, it may be better for you to wait six months and take the test again if you failed the first time. If you had a very recent drop in income, for example, you might pass the means test in the first part when you take it again.