What is the means test for filing Chapter 13 Bankruptcy?
The means test is a requirement for filing Chapter 13 Bankruptcy in Pennsylvania. Its purpose is to ensure that people who file for bankruptcy can repay their debt. The means test compares a person’s income and expenses to the median income of similar households in the same state. In order to file Chapter 13 Bankruptcy in Pennsylvania, the debtor must pass the means test. The means test requires an individual to compare their current monthly income over the prior six months to the median income for a similar household in Pennsylvania. The median income is determined by the United States Census Bureau and is adjusted each year. If a person’s income is lower than the median income, they automatically pass the means test and can file Chapter 13. However, if their income is higher than the median, their disposable income is determined. Disposable income is calculated by subtracting all of the person’s allowable expenses from their income. If the amount of disposable income is too high, the person must wait up to five years before they can file for Chapter 13 Bankruptcy. The means test helps ensure that people who file bankruptcy will be able to pay off their debt. It prevents people from filing for bankruptcy if they would be unable to make the required payments.
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