Chapter 7 bankruptcy is not for everyone. In order to be eligible to file for a Chapter 7 bankruptcy, you must be subject to a “means test.” This test was designed to prevent individuals with high incomes from utilizing the bankruptcy system to discharge debts that they could otherwise pay.
What is the Means Test?
First, you will need to calculate your current monthly income. This value will be compared to the median income for similar households in your state. When the value of your monthly income is less than your state’s median, you pass the means test and are eligible to pursue a Chapter 7 bankruptcy. If your income is higher, then you will need to determine how much disposable income your household has.
The means test attempts to calculate the amount of income you earn monthly that would be considered disposable. To reach this figure, your monthly expenses will be deducted from your current monthly income. If your disposable monthly income is high, then it’s unlikely you will pass the means test. Creditors expect you to utilize this disposable income to pay off your debts.
Filing for Chapter 7 Bankruptcy in New Jersey
If you fail the means test, then you can still use Chapter 13 bankruptcy to help you repay your debts. If you pass the means test, then you are eligible to file for Chapter 7. Our bankruptcy attorneys at Silverman and Roedel can help you determine whether filing for Chapter 7 or Chapter 13 bankruptcy is an option for you. We understand how stressful and emotionally trying financial situations are for you and your family, but we will work together with you to secure a new financial future. Together, we can develop a repayment plan, file for bankruptcy or brainstorm about your best legal options. To speak with one of our attorneys now, call our office at 973-772-6411.