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Before October 17, 2005, consumers who filed for bankruptcy had the choice to file for Chapter 7 or Chapter 13, if the bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) took effect on October 17, 2005 that the election is no longer to exist and consumers now have the "means test" to file for Chapter 7 bankruptcy protection.

Under the means test, it is presumed Chapter 7 bankruptcy is likely to be abused, and therefore not allowed if the debtor has monthly income less allowances and living expenses, and multiplied by 60 months (adjusted income) is greater than $ 10,000. If a debtor's adjusted income of less than $ 6,000, there is no presumption of abuse and the debtor choose Chapter 7 If a debtor's adjusted profit between $ 6,000 and $ 10,000, abuse is presumed if the debtor's income of more than 25% of its non-priority, unsecured debt securities.

The basics of bankruptcy law means test

In the means test, the courts will be the average income of the debtor for the 6 months prior to the application and compares it with the median income for that state. If it is below the median, Chapter 7, it remains open as an option. If there is more than the median, the remaining part of the means test will be.

The next step in calculating the income less living expenses (excluding payments on the debt in the bankruptcy), and multiplied this number times 60th This corresponds to the amount of income available over a 5-year period for repayment of the bonds.

If the profit and loss account for the debt repayment on the 5-year period is 10,000 U.S. dollars or more, then Chapter 13 is required. If there are fewer than 100 U.S. dollars per month, then Chapter 7 is again an option. If it is between $ 100 and $ 166.66, then that is measured by the debt as a percentage of 25% as the benchmark.

In summary, first find out whether you are above or below the median income for your state - median income is available on the new bankruptcy law-info.com. The income of the spouse, where they may be considered. Next, deduct your average monthly living expenses, as required by the IRS, the monthly income and multiply by 60. If the result of over $ 10,000, you stuck with Chapter 13 If the result is less than $ 6,000, you can still file Chapter 7 If the result is between $ 6,000 and $ 10,000, compared to 25% of your debts. About 25%, you are looking for in Chapter 13 for sure.

A helpful tip for all, to avoid turning the bankruptcy law means test. Since the means test is on wages in the six months preceding the application, some lawyers can file their customers during a slow period of employment or while they are between jobs. In other words, just smart time of filing your Chapter 7 case, you can use the bankruptcy law means test.

If you are still looking for a few helpful tips, visit my website on financial planning.

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