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Chapter 7 of Title 11 U.S. Code is the bankruptcy code that governs the process of liquidation under the bankruptcy laws of the U.S. In contrast to bankruptcy under Chapter 11 and Chapter 13, which govern the process of reorganization of a debtor, Chapter 7 bankruptcy is the most common form of bankruptcy in the U.S. [1]
BAPCPA restricted the number of debtors that could declare Chapter 7 bankruptcy. The act sets out a method to calculate a debtor's income, and compares this amount to the median income of the debtor's state. If the debtor's income is above the median income amount of the debtor's state, the debtor is subject to a "means test." [2]
Thus, the means test is a formula designed to keep filers with higher incomes from filing for Chapter 7 bankruptcy. These filers may use Chapter 13 bankruptcy to repay a portion of their debts, but may not use Chapter 7 to wipe out their debts altogether. [8] The bankruptcy means test is complex and the terms that govern many parts of it ...
A Chapter 13 may be best if you have steady income, several nonexempt assets and don’t pass the Chapter 7 means test. Other types of bankruptcy include: Chapter 9 bankruptcy for municipalities ...
You must have an average monthly income lower than the median income for your state or pass a means test. ... Once you move forward with Chapter 7 or Chapter 13 bankruptcy, four possible scenarios ...
The details vary between jurisdictions. In the US, the liquidation bankruptcy is governed by Chapter 7 of the Title 11 of the United States Code and is generally available to individuals passing a means test. Reorganization bankruptcy is governed by Chapters 11 and 13. [1] Chapter 11 is mostly used by high net-worth individuals. [2]
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