The Huggins Law Firm, PA
Call to Schedule a Free Consultation
Columbia 803-764-1558 Charleston 843-509-0039

Parts 1 and 2 of the bankruptcy means test

South Carolina residents who have decided to file for bankruptcy must complete a means test. It consists of two parts that are used to determine whether debtors can file for Chapter 7 bankruptcy or if they are restricted to Chapter 13 bankruptcy. While Chapter 7 bankruptcy can provide debt forgiveness for people with little income, Chapter 13 bankruptcy requires people to use their disposable income to pay off at least part of their debt.

In the first part of the bankruptcy means test, the debtor's household income is compared to the median household income in the state. If a debtor's income falls below the state's median income, the debtor may file for Chapter 7 bankruptcy without the need to pass the second part of the test. To demonstrate household income in the first part of the test, a person must show proof of income for the past six months.

Almost 90 percent of people who file for bankruptcy qualify for Chapter 7 after taking the first part of the means test. Debtors that must take the second part of the means test may still qualify for Chapter 7 if they can prove that their disposable income is low enough. The second part of the means test requires documentation on all allowable household expenses such as rent, food, medical costs and clothing. All of this information will be used to develop a Chapter 13 repayment plan for debtors who do not qualify for Chapter 7.

Taking the second part of the means test requires a lot of documentation, and the process can be fairly complicated. A lawyer can often help clients to make sure that they do not omit crucial documentation that could help them to qualify for Chapter 7 personal bankruptcy.

No Comments

Leave a comment
Comment Information

The Huggins Law Firm, PA

Columbia Office
1812 Lincoln Street
Suite 201
Columbia, SC 29201

Phone: 803-764-1558
Fax: 803-764-1563
Columbia Bankruptcy Office

Columbia Office

Charleston Office
925-D Wappoo Road
Charleston, SC 29407

Phone: 843-509-0039
Fax: 866-481-2325
Map & Directions

Charleston Office