Critical information about the means test

To qualify for Chapter 7 bankruptcy, debtors in New Jersey may need to pass a means test. The means test is designed to determine if an individual has enough disposable income to pay his or her creditors. It is important to note that those who are looking to have business debts discharged generally don't need to pass it. However, those who are subject to this step will begin the process by gathering as much personal financial information as possible.

This information will be used to determine if a debtor's household income is below the median for the state. If it is, a debtor has passed the means test. Typically, only information from the past six months will be used when making this calculation. If a person's household income is higher than the state median, it is still possible to qualify for a liquidation bankruptcy.

That will depend on how much disposable income a person has left after accounting for expenses. Allowable expenses may include rent payments, medical expenses and money spent on necessities such as food or clothing. Those who still aren't eligible for Chapter 7 bankruptcy may be able to file for Chapter 13 protection instead. Debtors may also want to file again at a later date if they believe that their income may fall below the state median income.

Individuals who are struggling to repay medical, credit card or other personal debt balances may benefit from filing for Chapter 7 bankruptcy. The potential benefits of doing so might include a stay of creditor contact as well as the ability to have debts discharged in a matter of months. An attorney may be able to help a person learn more about the means test and the role in could play in his or her case.

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