"Means Test"

The term "Means Test" refers to an analysis your Tulsa Oklahoma bankruptcy attorney will use to determine whether you qualify to file under Chapter 7 bankruptcy if you are contemplating filing a bankruptcy. If you do not meet the means test, you may still be able to file under another chapter, such as Chapter 13. The Means Test is a formula that includes a review of the filer's income and expenses. The test is two parts, and you first do step 1, then only do step 2 if necessary, as explained below. 1. Filer's current monthly income is compared to the median monthly income in a household the same size as the filer's and in the filer's home state. If the filer's income is less than the median income, the filer is qualified to file a Chapter 7 and no further analysis is needed. 2. If filer's income is higher than the median income, you must go further in the test to see if you can file for Chapter 7 bankruptcy. You subtract your allowed monthly living expenses (as determined by IRS guidelines) from your monthly income, which will give you your disposable income. Here's where it gets a little tricky: 2.1 If your projected disposable income over the next five years totals less than $6,000 ($100/month), you pass the Means Test and can file under Chapter 7. 2.2 If your projected disposable income over the next five years is greater than $10,000, you fail the Means Test and will not be allowed to file Chapter 7. 2.3 If your projected disposable income is between $6,000 and $10,000, you must go still further in the test for another calculation. It involves a comparison of your disposable income over the next five years to a percentage of your unsecured debt to determine whether any significant repayment to your creditors is possible. If there is enough disposable income over that five year period to be greater than 25% of your unsecured, non-priority debts, you fail the Means Test and cannot file under Chapter 7. If your disposable income over a five year period is less than 25% of your unsecured, non-priority debts, you pass the Means Test and can file a Chapter 7 bankruptcy. It basically wants to see if there is enough money to fund a Chapter 13 repayment plan that would at least pay back 25% or more to your creditors. If you cannot file under Chapter 7, you can consider filing under Chapter 13. A chapter 13 bankruptcy is a 3 to 5 year debt repayment plan. In a Chapter 13 bankruptcy, your payment plan is based upon what you can afford to pay your creditors, not on what your creditors want you to pay.  

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