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What is the purpose of the means test for Chapter 7 bankruptcy?

Consumers in Kentucky who have experienced unanticipated financial hardships due to loss of employment, medical emergencies or other misfortunes may be exploring their options under the Bankruptcy Code. If Chapter 7 seems the best solution for their circumstances, a means test will determine whether they qualify or whether they must file for Chapter 13 bankruptcy. The test will determine whether the consumer has enough disposable income to pay back some of his or her debts.

The means test involves the calculation of the total of all sources of revenue minus all expenses. Certain allowed expenses such as legally obligated payments and health and welfare requirements may be deducted. If the balance exceeds the median income for Kentucky households, the person might have to file for Chapter 13 bankruptcy.

Some consumers are exempt from having to do the means test because they qualify for Chapter 7 bankruptcy automatically. There is a list of median incomes for Kentucky families based on the number of people per household. If a person's income is lower than the listed amount for the size of his or her family, qualification for Chapter 7 will be automatic. Other exemptions exist for disabled veterans who incurred their debts mainly during activities including homeland defense or active duty.

Qualifying for Chapter 7 bankruptcy does not mean the consumer has no other options. Both Chapter 7 and Chapter 13 have pros and cons that may need careful consideration before a choice is made. For this reason, many Kentucky people consult with an experienced bankruptcy attorney who can explain the available options and provide support and guidance based on the circumstances of the individual.

Source:, "Kentucky Bankruptcy Means Test", Accessed on March 28, 2017

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