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What is the Means Test?

If you are interested in filing for Chapter 7 bankruptcy in Pennsylvania, you must pass the “means test.” First, you need to determine the amount you can earn without repaying unsecured creditors based on your average household income and your household size. 

Your annual household income consists of your average monthly income – from work salary/wages, bonuses, self-employment, unemployment benefits, as well as alimony and child support payments – over the last six calendar months multiplied by 12. Your household size includes you, your spouse (even if he/she has no intention of filing bankruptcy), and your children (if applicable). 

As long as your average income is below the state median for your household size, then you are eligible for Chapter 7. While this type of bankruptcy allows you to discharge your debt, you may lose any property you cannot protect with an exemption. 

On the other hand, if your income is higher than the median, you must determine if you would have enough disposable income remaining – after you subtract allowed expenses – to pay back some of your unsecured debt (e.g., credit card bills, medical expenses, etc.). If your disposable income equal to or more than the lawful minimum, you will be required to pay back some or all your debt in Chapter 13 bankruptcy, rather than having your debt discharged through Chapter 7.  

Chapter 13 allows you to reorganize your debt to ensure your repayment plan is manageable. The payment plan may last between three to five years. 

Whether you pass or fail the means test, it is imperative to obtain legal assistance from an experienced lawyer to determine all your available legal options to help you overcome your debt in the best way possible. At Dethlefs, Pykosh & Murphy Law, our Harrisburg bankruptcy attorneys have nearly a decade of experience providing our clients with affordable and personalized legal solutions. 

If you are interested in taking the means test in Pennsylvania, contact us today at (717) 559-0271 for a free initial consultation.