The incidence of bankruptcy filings and foreclosure is at an all time high and debt trapped people are taking all possible measures to wriggle out of the country’s “economic avalanche”, which has managed to knock out consumers from the driver’s seat. It is a well known fact that prior to the liquidity crunch, the economy of United States was consumer driven. Employment rate was high; taxes were quite low, even the real estate market was doing pretty well. Filing bankruptcy was infrequent and much easier.

The new Federal bankruptcy Laws that came into effect on 17th October 2005 changed the way bankruptcy is filed. Norms have become stringent and there are plenty of barriers you have to overcome in form of eligibility criteria. The Means Test is one of them.

Means test has been introduced so that people with higher income don’t file for Chapter 7 bankruptcy. Means test is applicable for consumer debts. Business debts are kept outside the purview of the Means test. If you fail to qualify for Chapter 7 bankruptcy, you can qualify for Chapter 13 bankruptcy. If you have a higher income doesn’t mean that you don’t qualify for Chapter 7 bankruptcy. Your expenses may be very high.

How does Means test in Chapter 7 work?

Means test was introduced so that consumers who are genuinely unable to repay debts can make use of Chapter 7 bankruptcy. Chapter 7 bankruptcy is the easiest of all bankruptcies and you can get out of debt within a very short time span by converting your assets into money and by paying off your creditors. In means test your expenses are deducted from your monthly disposable income. If your disposable income is very high you won’t qualify for Chapter 7 bankruptcy. Your income is compared to the median income of a similar household in the state you reside. If your current income is less than the median income you are eligible for filing Chapter 7 bankruptcy.

Use online calculators for Means test

There are many websites offering online calculators. You can find out whether you qualify for Chapter 7 bankruptcy or not with the help of the online calculators from the comfort of your home and office.