The Bankruptcy Abuse Prevention and Consumer Protection Act provides a set of guidelines that must be followed in order to seek protection under a Chapter 7 or Chapter 13 bankruptcy petition. This is especially true for Chapter 7 applications. Part of the process involves a means test to determine whether or not you are eligible for protection.

The means test takes into account your total income and your total debts. For Chapter 7 petitions, there needs to be a determination that your income will not be sufficient to repay any of your debts. For a Chapter 13 petition, the means test will determine how much you can put towards repaying some or all of your debts.

Many individuals try to petition the court for a Chapter 7 application only to find that their income is too high to qualify. Generally speaking, (although not always,) if you are employed then your application for Chapter 7 will be denied and you will be referred on to a Chapter 13 application.

The information you need to reveal includes ALL income and ALL expenditures including food, accommodation, medical, transport and, of course, your debts. All income means income from any source.

Bankruptcy is not a process that individuals can use repeatedly so careful thought needs to go into the application. In fact, the mandatory time period between Chapter 7 filings is set at eight years for individuals.

The means test cannot be avoided since it determines your eligibility for bankruptcy. If you are considering a bankruptcy application, consult a specialist lawyer first. They can help determine whether or not you should apply for a Chapter 7 or a Chapter 13 petition.

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