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Tennessee residents may want to learn about Chapter 7 means test

In order to file for bankruptcy, individuals must first qualify. For Chapter 7, a means test must first be passed. This test utilizes personal information pertaining to income, expenses and other financial and personal factors to determine whether an individual will qualify. If Tennessee residents are worried about passing such a test, it may assuage their apprehensions to understand that the majority of individuals seeking this chapter of bankruptcy pass the test easily.

The test has two parts that are used to determine eligibility. First, the test will examine the individual's household income to determine whether the income level is below the state's median level. The test examines the last six months of financial information, so having documents pertaining to that time period could prove useful. If the income level is below the state median, the petitioner will be allowed to file for Chapter 7. 

If an individual does not pass the means test during the first part, he or she may still be able to pass the second part. This process involves determining disposable income, which is income left over after allowable expenses. If the disposable income level is low enough, the test may still be passed, and Chapter 7 could be a viable route to debt relief. If after both parts a party still does not pass the test, he or she may wish to look into Chapter 13 bankruptcy. 

Passing the means test for Chapter 7 bankruptcy could be the first step toward Tennessee residents being able to address their overwhelming debt. If individuals are concerned about the proper documents needed to determine their household incomes or disposable income, they may wish to seek professional assistance. Experienced bankruptcy attorneys may be able to provide useful information on such documents, as well as information on the means test itself for parties who are interested.

Source:, "The Bankruptcy Means Test: What It Is, Why It Matters", Sean Pyles, July 14, 2016

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