Many residents in Kentucky find themselves struggling to make ends meet every month and to keep up on all of their bills. When evaluating their options, they may consider filing for bankruptcy.
When deciding whether or not to file bankruptcy, a person may need to decide which type of bankruptcy fits their needs. The bankruptcy means test may help them identify their options.
The purpose of the bankruptcy means test
As explained by NerdWallet, a person must qualify before filing for a Chapter 7 or a Chapter 13 bankruptcy plan. Qualification includes a review of the person’s financial situation. People seeking potential relief via a Chapter 7 bankruptcy may need to pass what is called the means test. In this test, their income and expenses are reviewed.
One objective of the means test is to determine whether or not the person has any income left after paying basic living expenses that may be used to repay other debt. The means test may also help the debtor understand if they may file for a Chapter 7 bankruptcy or a Chapter 13 bankruptcy.
Means testing and type of bankruptcy
According to the U.S. Courts, a person’s income may need to be below the Kentucky state median to pass the bankruptcy means test. In addition to assessing a person’s income, however, the means test may take into account some allowable expenses.
The size of a person’s household may also factor into what expenses or amount of expenses may be allowable under the means test. If a person does not qualify for a Chapter 7 bankruptcy after taking the means test, they may still qualify for a Chapter 13 bankruptcy.