How Do You Qualify for the Means Test in Illinois?
As an individual in Illinois, bankruptcy laws allow you to file for two different types: 7 and 13. With Chapter 7, you can wipe out your unsecured debts entirely, whereas Chapter 13 requires you to make monthly payments towards your debt over the course of 3 to 5 years.
Since Ch. 7 provides a greater amount of debt relief, income limits and other conditions are placed on who is eligible to use this type of bankruptcy. The “means test” is the method used to determine if you qualify to file Ch. 7, or if you have to go with Ch. 13 instead.
What Is a Means Test?
This test determines whether a debtor can qualify for Chapter 7 bankruptcy in Illinois. It looks at your earnings and expenses to decide if your household disposable income falls below a certain threshold. In other words, the test determines whether your family has sufficient financial resources to pay your debt without filing for bankruptcy. If you fail, you can still file under 13, but you won’t be eligible for a 7.
How Can You Pass?
To pass the means test, you must meet certain income standards. There are two parts to the analysis. First, you’ll need to calculate your gross earnings for the 6 months immediately before filing for bankruptcy. To do this, add together your gross monthly wages for the past 6 months and divide by 6 to get the average monthly amount. Then, multiple your average monthly wages by 12 to get your average gross annual income
If this number is below the median for an Illinois household of the same size as yours, you automatically pass without any further steps or procedures required.
However, if your earnings are higher than the median, you can still pass if your disposable income is low enough. To calculate this number, you will subtract allowed expenses such as taxes, housing, utilities, and insurance from your gross wages. If it exceeds the limit, you fail and can’t file for Chapter 7.
What Happens if You Fail the Means Test in Illinois?
If you fail, you won’t qualify for Chapter 7. Fortunately, you can still file for Chapter 13 since there are no income limits for this type. In fact, for many Illinois families with some money coming in, Ch. 13 may be the better option, regardless of whether you can pass, because it allows you to keep all of your possessions.
Whether or not you qualify for the means test, bankruptcy can help you and your family eliminate your debt and move forward with your life. The skilled Illinois lawyers at DebtStoppers can review your financial situation to determine the best way for your family to recover from your money troubles.
Call or text DebtStoppers in Chicago at 312-913-0630 to request a free initial consultation with a member of our knowledgeable legal team. We can walk you through the means test procedures and help you decide which of the available bankruptcies is right for you and your family’s debt problems.