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Wednesday, February 18, 2009

The Bankruotcy Means Test What It Means

By Janice Kay

Filing bankruptcy means jumping through some hoops. One of the more complicated, controversial and frustrating aspects of filing for bankruptcy today is that every person who wishes to file must first take a bankruptcy test. Known as a bankruptcy means test, it is a mathematical calculation that is used to figure out the kind of bankruptcy that an individual is most suited to file for.

The bankruptcy means test is distributed by the state. Income and expense information must be entered into the form and then the necessary calculations done. The calculations and the results of your test must be brought with you to bankruptcy court and they then become a part of your schedule of present income and expenditures.

The bankruptcy means test contains two variables. These include the Median State Income Figures which are published by the U.S. Census Bureau, and the IRS National Standards for allowable Living Expenses.

If a debtor takes the test and does not pass it, he or she is unable to file for a Chapter 7 Bankruptcy which would see all of his or her debts gone. However the person can still file for a Chapter 13 Bankruptcy. In this instance, a debt repayment plan is arranged that takes place over a period of three to five years

The income requirements in every state are not the same. If you make too much money you may be turned down for bankruptcy, depending on where you live. If this happens to you, you need to seek an alternative to your situation. One option is to apply for a cash-out refinance loan from your financial institution.

The court needs to make a ruling on an individuals behalf and the bankruptcy test helps to do this. The main purpose of the bankruptcy means test is to weed out the individuals who really see no way out of their debt besides bankruptcy and those who have other options to consider.

If you are thinking about filing for bankruptcy you need a good bankruptcy lawyer as well as a mortgage professional in your corner. The lawyer can provide guidance for the decisions relating to the bankruptcy as well as the means test. On the other hand, the mortgage specialist can help the debtor navigate all of the financial ropes inherent in the bankruptcy.

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