If you want to file for bankruptcy protection, then you will have to choose which Chapter you will file. Chapter 7 bankruptcy allows you to liquidate your non-exempt assets to repay your debt and then the court dismisses any remaining debt you cannot pay off. Chapter 13 bankruptcy is a repayment plan. You will create a plan to repay as much of your debt as possible within your financial means. Once you complete your plan, which may last three to five years, the court will dismiss any outstanding debt you did not completely pay.
You have your choice between filing Chapter 7 and 13 to some extent. While you may choose to file either, you must meet a means test to get approval from the court to file Chapter 7. According to NerdWallet, the means test will look at your expenses and income to determine if you meet income requirements for filing Chapter 7. If you do not meet the requirements, you still have the option to file Chapter 13.
The reasoning
The idea behind the means test is to ensure that people do not file for Chapter 7 when they have the ability to repay some debts. So, the means test will only allow those with lower incomes to file so that creditors may have the chance to obtain some repayment through those who do not qualify and must file under Chapter 13.
What it looks for
The means test will consider your income and expenses along with some other information about your circumstances. The test will determine if you have disposable income that could go to repay debts. You may not have to go through an extensive process if your income is below Louisiana’s state media income because being below that level automatically means you pass the test.
