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An introduction to means testing bankruptcy in montgomery county

Author: Chris Gayle
by Chris Gayle
Posted: Apr 23, 2014

If you are not able to pay the debts then the option of bankruptcy is said to be the best option for escaping from such kind of a situation. Filing bankruptcy case acts as a court order that will keep the creditors away from harassing you through phone calls, mails or through letters. However, there is a difference in filing for chapter 7 and a chapter 13 bankruptcy. But before going further, it is important to understand about the types of bankruptcy. A chapter 13 bankruptcy forces debtors to make the monthly payments to the creditors under a court’s approved payment plan. On the other hand, chapter 7 does not necessitate any payments. Instead, a chapter 7 will discharge the applicant’s assets and use the proceeds of the sale to repay creditors.

In order to qualify for chapter 7 bankruptcy an applicant has to pass the means test. This is an income based test with the main motive to protect the powerful benefits of chapter 7 for those who cannot afford to pay back their debts. It is described as a formula which is used in determining whether the individual has enough money available to make the payment to creditors or not. The means testing bankruptcy in Montgomery County has helped lot of people to file under chapter 7.Means Test is a two-step process:

Comparison of Median income: Under this step if the current monthly income is less than the median income for a household of your size in your state then it means you are eligible to file for chapter 7. But if in case the median income is higher, you need to go through the next step of this process.

Calculation of disposable income and unsecured debts: This step is little complex and breaks down in to some sub stages. In its first stage, certain allowable expenses are subtracted from the income to find out the disposable income. In the next stage if your disposable income is less over the next five years than 25% of unsecured debt, non-priority debts you are likely to pass the test. But if it is greater, you are not eligible for chapter 7 bankruptcy.

You can even use means test calculator to determine your eligibility under chapter 7. You only need to enter the zip code and then the calculator with applicable income and expense standard tells your eligibility. If you don’t pass the chapter 7 means test bankruptcy in Montgomery County, you can file chapter 13, which is said to be still the best way to handle specific types of problems like curing a default on a mortgage.

It is described as a formula which is used in determining whether the individual has enough money available to make the payment to creditors or not.the best option for escaping from such kind of a situation. For more information click here

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Author: Chris Gayle

Chris Gayle

Member since: Dec 23, 2013
Published articles: 601

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