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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]
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 ...
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]
Chapter 7 is generally available to lower-income individuals who pass a means test. If you earn more than the threshold, you may be directed to Chapter 13 instead.
Chapter 13 bankruptcy. With a Chapter 13 bankruptcy, some unsecured debts may be forgiven. However, remaining debts are reorganized and set up to be repaid over a specific length of time, usually ...
Once you move forward with Chapter 7 or Chapter 13 bankruptcy, four possible scenarios might play out. All of your student loans and other debts are discharged. Your loans are partially discharged.
The means test was intended to make it more difficult for a significant number of financially distressed individual debtors whose debts are primarily consumer debts to qualify for relief under Chapter 7 of the Bankruptcy Code. The "means test" is employed in cases where an individual with primarily consumer debts has more than the average ...
Depending on whether you filed Chapter 7 or Chapter 13, it'll take two or four years to qualify for a conventional mortgage, one or two years for FHA or VA loans, and one or three years for USDA loan.
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