What exactly is a means test?

If you’re drowning in debt, then you may have considered filing for bankruptcy as a way to resolve your financial problems. It may not be as easy as it seems though. You must first pass a means test before you can file for Chapter 7 bankruptcy.

There are two steps to the means test. The first part aims to help you discover how much disposable income you have. You may only be able to file for Chapter 7 bankruptcy if your household income falls below the Wisconsin state median income for your family size. You’ll need to proceed to the second step of the means test to determine that for sure.

The second step of the means test involves you tallying your allowable expenses including grocery, medical, clothing and rent costs over the past six months. You should then subtract that amount from your household income. Whatever is left over is considered to be your disposable income. This is how much that the bankruptcy court is likely to conclude that you have available to pay the debts that you owe.

You must realize that you’re not automatically disqualified from filing for bankruptcy simply because you have some disposable income. It’s left up to the bankruptcy court’s discretion to determine if it’s too high of an amount to stop you from filing.

You’re generally eligible to file for Chapter 7 bankruptcy as long as you pass the means test. It’s not the only debt relief option that you may want to consider though. While filing for this type of bankruptcy may seem ideal if you have significant unsecured debts, it may not be the best option for you if you have a car or home that you want to keep. Chapter 13 may be more appropriate in this situation or if you don’t pass your means test.

A bankruptcy attorney can evaluate your financial situation and what your long-term goals are and help you decide what debt relief option is most ideal for you and your family here in Oshkosh.