The Means Test

Bankruptcy is a last resort for many individuals, couples and business owners that are no longer able to keep a handle on their finances. The cost of living in Long Island is high and with the negative toll on the economy, almost everyone can feel the effects in some way. For those looking to deal with their debt, there are several options available. Some of these are more extreme than others and should be properly researched before pursuing them. Bankruptcy is a more extreme form of debt relief but is the best option for many people. While it can initially seem harsh, it allows many people to begin again and eventually get started on rebuilding their credit.

For those looking to file for bankruptcy, there is more than just one form. Chapter 13 is the less common one, and is typically for those that have a steady source of  income. While they may be struggling from their expenses, they could eventually pay for them with some help. Chapter 7 is the more widely known form and is the liquidation of assets that many people begin to cringe over when they hear. It is actually highly beneficial for many people that file for it and can provide them with a fresh start they need.

Chapter 7 and the Means Test

Before getting started, those looking to file will need to pass the means test. This is a test that has been established by the government in order to regulate who can file. Bankruptcy is really meant for those with extreme debt and the means test looks to keep this in order. The means test got its name from its assessment of looking to determine who has the means of paying the expenses they owe. Some individuals may be able to rid themselves of debt without filing under Chapter 7. The test was added in 2005 and assesses the average income in the area. Those that are found to be above this level will likely be unable to apply. The average income is usually based off the state that the individual lives in or is filing in.

For those that do pass the test, they can then file for Chapter 7. This can allow them to wipe out more of a significant portion of their debts. It is still important to work with a professional before doing this. Eligibility for filling under Chapter 7 does not mean it is what should be done in every case. Many people will be ineligible to file under Chapter 7 but can still file under Chapter 13. This is a better option for some, as it will allow them to keep most of their assets. It combines payments into a sum that will be paid towards each month. To find out if you qualify you can use an online calculator or speak with a Long Island bankruptcy attorney.

FOR MORE INFORMATION CALL JACOBY & JACOBY AT (631) 289-4600.