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The New Bankruptcy Law "Means Test" Explained by Jacksonville Lawyer


Jacksonville bankruptcy lawyer, Robert Peters, advised anyone considering filing for bankruptcy to first understand the ‘means test’. The test is used by the courts to determine a person’s eligibility for filing Chapter 7 or Chapter 13 bankruptcy.

The majority of bankruptcies filed are Chapter 7 or Chapter 13. In Chapter 7 bankruptcy, debtors can typically wipe out their debts in full and get a fresh start. In Chapter 13, the debtor must pay back a portion of the debt over a designated period of time. 3-5 years is the typical timeframe.

New rules in filing for bankruptcy now force many people to file under Chapter 13 even if they have NO assets. This is because the means test uses the income of the debtor from the six months leading up to the filing of the bankruptcy to determine their income. The problem with this test is that even if the debtor’s income has recently decreased, the use of the six months before the filing date may make the debtor’s income for bankruptcy purposes higher than it will actually be and place him into an income situation where he may be required to file a Chapter 13 bankruptcy.

To apply the means test, bankruptcy courts will first examine the debtor’s average income for the six months prior to filing and compare it to the median income for that state. If the debtors income is below the median, then Chapter 7 remains open as an option. If the income exceeds the median, the remaining parts of the means test comes into play and the debtor could be forced to file Chapter 13.

For those who have had a recent decrease in income or a job loss, Peters sometimes recommends to wait several months before filing for bankruptcy. This will allow the decrease in income to be reflected in the current monthly income calculation and make it more likely for the debtor to be able to file Chapter 7. Current monthly income is only one of many factors to consider in deciding whether to wait to file a bankruptcy.

Anyone seeking the advice of a Jacksonville bankruptcy lawyer is encouraged to call Robert L Peters at (904) 421-6907 for a free consultation or go online to .

About Robert L Peters
Attorney Robert Peters specializes in personal bankruptcy & foreclosure defense in Jacksonville and Amelia Island/Fernandina Beach, Florida. Robert Peters helps his clients restart their lives through bankruptcy relief and foreclosure defense.



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