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The means test, which is the Chapter 7 means test, is a formula that uses in bankruptcy law to decide if the debtor is eligible for Chapter 7 bankruptcy. If the debtor fails the means test, the debtor can only apply for Chapter 13 bankruptcy.
Chapter 7 is considered a liquidation bankruptcy: it doesnt require a repayment plan but the business has to sell some assets to pay creditors. Chapter 11 is considered a reorganization bankruptcy that allows businesses to maintain their operations while creating a plan to repay creditors.
The Means Test Rental income, business income, interest and dividends, pensions and retirement plans, and household expenses should all be included in your test. If you calculate that your total monthly income is less than $7,475 over the next sixty months, then youll be eligible for Chapter 7 bankruptcy.
Chapter 7 bankruptcy typically discharges your obligations and allows you to get on with your life much faster than Chapter 13, which gives you a chance to maintain your property. The tradeoff for Chapter 13: You complete a court-ordered repayment plan, which can take three to five years.
If your total monthly income over the course of the next 60 months is less than $7,475 then you pass the means test and you may file a Chapter 7 bankruptcy. If it is over $12,475 then you fail the means test and dont have the option of filing Chapter 7.

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