Deciding which type of bankruptcy is appropriate is more complicated than simply checking a box on a form. Chapter 7, Chapter 13 and Chapter 11 may all be possibilities. However, determining which one is the appropriate choice does take some thought. Additionally, if the individual is considering Chapter 7 bankruptcy, he or she will need to pass the bankruptcy means test in order to be able to pursue this option.
The word “test” often strikes fear in many individuals. While this test must be passed in order to qualify for Chapter 7 bankruptcy, the individual may still choose to file one of the other forms if the test shows that he or she does not qualify. In essence, the test analyzes the individual’s finances in terms of what he or she has coming in, going out and the size of the family affected. In other words, the means test is looking to determine if the individual has enough income to pay his or her debts.
The first step in this test is to provide documentation regarding the individual and/or family’s income over the past six month time period. If the income is below the state median, then the test has been passed. If the income is above the state median, then it will be necessary to move on to step two.
Step two of the test analyzes the individual and/or family’s expenses. This may include housing, medical, food, clothing and other such allowable expenses. The Tennessee resident will want to be very thorough in this part of the process; this is the area where mistakes generally occur. Once the individual has completed and passed the bankruptcy means test, the individual will be able to move forward with the Chapter 7 bankruptcy process.