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The bankruptcy process begins with the means test

Before Kentucky residents can file for Chapter 7 bankruptcy, they must take the means test. The test determines whether the debtor is eligible to file under that chapter by taking into account the debtor's income, monthly expenses and family size. Those who cannot qualify for Chapter 7 bankruptcy after taking the means test might still be able to file for Chapter 13 bankruptcy.

The first part of the bankruptcy means test simply asks how much income the debtor has earned over the past six months. If the debtor's income falls below the median income in Kentucky, the debtor passes the test and may file for Chapter 7 bankruptcy. Most people who take the means test pass the first part and do not have to proceed to the second and final part.

People who earn income that is above the state's median income may still be able to qualify for Chapter 7 bankruptcy. The second part of the means test will consider the last six months of the debtor's 'allowable expenses" from things like rent, medical costs, clothing and groceries. A person whose disposable income after expenses is low enough may still be able to file under Chapter 7.

Some people who qualify for Chapter 7 are actually better off filing for Chapter 13 bankruptcy. Chapter 13 allows a debtor who has a regular source of income to restructure and repay indebtedness over a period of three to five years pursuant to a plan that is prepared and then submitted to the court for its approval. Bankruptcy attorneys will also tell their clients that this chapter may allow them to keep their home if the plan provides a mechanism to catch up on past due mortgage payments.

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