Means Test

Federal bankruptcy laws provide for a “means test” which will determine whether you are eligible to file of Chapter 7 bankruptcy. If your income is below the median income for families in New Jersey, based on Census Bureau statistics, you will be eligible. If you make more than the median income for families in New Jersey, your income over the past six months is considered, along with mortgage and car payments, back taxes and child support due, and school expenses up to $1,500 per year.

You won’t be eligible for a Chapter 7 bankruptcy if, after deducting these amounts, and the living expenses provided in the Internal Revenue Service’s national collection standards, you can still pay at least $6,000 ($100/month) to unsecured creditors over five years. If you don’t qualify for a Chapter 7 bankruptcy, your only option would be a Chapter 13 bankruptcy.

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