WI Chapter 7 Bankruptcy Means Test

24 - Oct - 2013
Credit Card Debt

Basically, a bankruptcy ‘means test’ is what determines whether or not you may qualify for Chapter 7 bankruptcy. The means test consists of two-parts, but you only need to pass one of them to qualify. In 2005 when the bankruptcy code was revamped, providing fixed income formulas, it was in an attempt to prevent people with higher monthly incomes from filing. Also, people cannot file for Chapter 7 if they have already received a bankruptcy discharge within the last six to eight years. But don’t think that this new test will prevent you from filing. The truth is that most people considering Chapter 7 bankruptcy will have no trouble passing it.

Median Income Test

This is a very simple test that compares your average household income for the past six calendar months to the median income for your state. If your income is below the median, you qualify for Chapter 7. If it is above the median, you must pass Test 2.

Ch.7 Bankruptcy can discharge:

  • Credit card debt, including store cards
  • Medical bills
  • Payday loans
  • Personal loans
  • Deficient balances on cars/real estate

Disposable Income Test

The disposable income test is the second test. It deducts expenses from your income to determine how much you can pay your unsecured creditors over the next five years. Certain deductions are standard allowances based on information such as the number of vehicles you operate, the number of people in your household, and the cost of living in specific WI counties. In addition, you can also deduct some actual expenses such as mortgage and vehicle loan payments.

Income Fails Chapter 7 Tests

No need to worry if your income fails the Chapter 7 tests because you’ll still have the option to file a Chapter 13 repayment plan.

Bankruptcy Test Questions

Have more questions regarding bankruptcy qualifications? Your Debt Advisors bankruptcy attorney is familiar with all of the rules and regulations behind the test. Whether you decide to file Chapter 7 or Chapter 13, the attorneys can help you navigate through the process to find resolution quickly. In addition, they will be able to answer any other questions that you may have.

Request your free consultation with an attorney.

Related Blog

Exploring Alternatives to Bankruptcy: Debt Management Plans

Exploring Alternatives to Bankruptcy: Debt Management Plans

The average American household has more than $100,000 in debt. While bankruptcy often emerges as a well-known option, it’s not the only path available for debt relief. Debt Management Plans (DMP..

Your Legal Rights During the Debt Collection Process

Your Legal Rights During the Debt Collection Process

In August 2021, about 64 million people with a credit record (approximately  28% of Americans) had debt in collections on their credit report. Although the experience of debt collection is not unusua..


One-on-one Attention

Make the Right Choice