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Information used in bankruptcy means testing

Virginia individuals facing financial challenges might consider bankruptcy as a way to get a fresh start, but income eligibility for certain types of bankruptcy must be determined first. Known as means testing, this determination is based on the median income for the household size based on national information developed by the United States Census Bureau, the Bureau of Labor Statistics and other agencies. Correct completion of means testing forms is important for ensuring the most appropriate option is used in filing for bankruptcy.

Information about typical expenses a household faces is used in determining whether a couple or individual is eligible for Chapter 7. These expenses include the maintenance and payments for vehicles unless there are no current payment requirements. If a car is already owned, the operating costs are included in means testing computations. Health care expenses for out-of-pocket payments are also estimated based on national averages. Housing allowances are determined based on the state and county of residence. Additionally, expenses for food, apparel, personal products and services, housekeeping and additional needs are computed based on the number of household members. These are included on the forms along with the median household income found on the provided table.

A debtor meeting the means testing criteria for Chapter 7 may proceed with the submission of a petition for this form of bankruptcy, which allows for the discharge of certain debts. If the standards for Chapter 7, an alternative approach may be possible. Chapter 13 allows for a restructuring of payments over a period of between three and five years before discharging portions of a petitioner's debt.

There are other significant differences between Chapter 7 and Chapter 13. One requirement that both have in common, however, is that an individual debtor must complete an approved credit counseling course within 180 days prior to filing.

Source: The United States Department of Justice, "Means Testing", October 20, 2014

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