When you file for personal bankruptcy in Tennessee, you typically do so through either a Chapter 7 or a Chapter 13 bankruptcy proceeding. There are some key differences between the two. A big difference is that a Chapter 7 bankruptcy may help you if you are working with a limited income, while a Chapter 13 may be appropriate if you have enough to pay back at least some of what you owe.
According to NerdWallet, if you are looking to move forward with a Chapter 7 bankruptcy, you must first pass a means test. Most people who attempt to pass the test do so with relative ease, and the test involves two steps.
The first step
The first step in the bankruptcy means test requires that you compare your household income with that of the median in Tennessee. Use the past six months for reference when taking the test. If your household income is the lower of the two, you do not need to worry about step two because you have already passed the test.
The second step
Even if your household income is higher than the median one in Tennessee, you may be able to proceed with a Chapter 7 bankruptcy depending on the results of step two of the means test. This step asks that you document all necessary expenses from the last six months and compare them against your income to see how much remains.
You must be meticulous here, as any omissions or errors may complicate or threaten your bankruptcy case. How much you have leftover after paying all allowable expenses determines whether you may move forward with a Chapter 7 bankruptcy.