BAD CREDIT CASH LOANS AND FINANCING: Unique Content Article: Chapter 7

Chapter 7 - The Means Test

by Bob Tremerituus

There are a number of ways of filing for bankruptcy in the US, and they are referred to as "chapters". With 85% of debtors filing under chapter 7, this is the most popular form of bankruptcy in the US, probably as it removes all debt (there are some exceptions like tax, alimony and student loans to name 3), unlike the second most common form of bankruptcy, chapter 13, where debt is repaid by means of a legally enforced repayment plan.

This is despite the fact that in chapter 7 all assets are sold to repay as much money as possible.

The problem is that it is possible that the sale of an individuals assets will fall far short of the amount of money owed, leaving creditors out of pocket by some distance.

Often this is just a sad reality of life, but until a few years ago chapter 7 could be used by the unscrupulous simply to get rid of debt that they could in fact afford to repay, albeit with a little rearranging of their debts.

To ensure that creditors generally get paid the maximum amount possible, chapter 7 bankruptcy now comes with a compulsory "means test". This means test is applicable to those who file who have mainly consumer debt. Businesses do not take the means test.

This was introduced to make certain that creditors got as much of their money as possible by ensuring that those who could pay did pay.

If this works out at less than the median income for a household of the same size in the same state you immediately pass the means test and qualify for chapter 7.

The first stage of the test is to see if the applicant's disposable income for the previous 6 months is less than the median income for a same sized household in the same state. If it is you can go straight into chapter 7. If not, the applicant is to some extent at the mercy of the court, who decide whether the amount of the applicant's disposable income is sufficient to make some repayment of their unsecured debt. The applicant can often find that the court considers that they can, but in reality it leaves the applicant with very little money to live on, making life tough financially.

This can vary from state to state, as they all have different ideas on what reasonable living expenses are. In other words, you may find that you have very little left to live on, but are forced into a chapter 13 bankruptcy, where debt is repaid over 3-5 years.

The point is that you should really get professional legal advice before filing bankruptcy, so you can be properly prepared. - 41115

Bankruptcy is a torrid step, no matter what other people may advise you. It can ruin your financial postion as your credit rating drops. Although chapter 7 is the most common form of bankruptcy, it may be worth looking at (http://chapter13bankruptcylaw.net) chapter 13 bankruptcy law. If you would like further free information and advice, visit (http://chapter13bankruptcylaw.net) www.chapter13bankruptcylaw.net.
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New Unique Article!

Title: Chapter 7 - The Means Test
Author: Bob Tremerituus
Email: ntoulson@googlemail.com
Keywords: chapter 13 bankruptcy,chapter 7 bankruptcy,Bankruptcy,liquidation,personal finance,wealth management,debt consolidation,liquidity
Word Count: 442
Category: Finance:Debt Consolidation
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