When it comes to bankruptcy, the options are numerous, but one crucial step often gets overlooked: meeting state's "means test" part 1. This article will delve into the importance of passing this initial test before qualifying for Chapter 7 bankruptcy.
The means test, also known as the Means Test or Chapter 7 Means Test, is a federal requirement that states must adhere to when considering individuals and businesses seeking Chapter 7 bankruptcy relief. Its primary purpose is to ensure that those eligible for Chapter 7 are truly financially struggling, rather than just claiming to be so.
State means tests assess an individual's or business's income, expenses, assets, and debts to determine their ability to repay debts. The test evaluates whether the debtor's net worth minus their necessary expenses is less than 25% of their gross income. In order to qualify for Chapter 7 bankruptcy, a person must pass this initial means test.
Failure to meet state's "means test" part 1 can result in an automatic stay being lifted, which would immediately put creditors' collections and repossession efforts on hold. This means that assets may be sold, debts may be discharged, or the individual may have their wages garnished without proper authorization.
It is essential to note that bankruptcy lawyers and financial advisors often advise individuals to pass this initial test before pursuing Chapter 7 bankruptcy. By doing so, they can avoid potential pitfalls and ensure a smoother recovery process.
At https://www.thewatchtower.com/blogs_on/when-do-people-have-to-file-bankruptcy, you can find more information on how to prepare for and pass the state means test part 1, as well as other resources for individuals seeking bankruptcy relief.
https://www.thewatchtower.com/blogs_on/when-do-people-have-to-file-bankruptcy