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Chapter7 bankruptcy and the means test

Many Tennessee residents have serious financial troubles. In these cases, people are looking for debt relief in order to get a new financial start. Many turn to Chapter7 bankruptcy in order to seek the relief they desperately need. In a Chapter 7 bankruptcy, people can see their credit card debt, medical debt and other debt erased. This can be a great relief for people struggling to make ends meet.

However, Chapter 7 bankruptcy is not available to every debtor in Tennessee. In order to qualify for Chapter 7 bankruptcy, Tennessee residents often need to pass the means test. The means test is a test to see if a person financially qualifies for Chapter 7 bankruptcy. If people cannot pass the means test, they will likely be required to file for Chapter 13 bankruptcy instead.

There are two steps in the means test. The first step examines a person's average monthly income to determine if it is higher or lower than the state's median family income. During the step, the court will look at the person's income for the six months preceding the bankruptcy petition. In this calculation, income from a variety of sources -- including child support payments, wages, dividends, worker's compensation benefits, retirement income and other payments -- will be used to determine a person's income.

If a person's average income is less than the state's median family income, then the person qualifies to file a Chapter 7 bankruptcy petition. If the person's average income is higher than the state's median income, then the person must go on to step two.

In step two, the court will allow certain deductions from the person's income. If after these deductions are made the person's income is below the state's median family income, then the person may file for Chapter 7 bankruptcy.

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Kenneth C. Rannick, P.C.
4416 Brainerd Road
Chattanooga, TN 37411

Phone: 423-624-4002
Toll Free: 800-257-7594
Fax: 423-624-0509
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