Means Test Decides Whether You Can File Chapter 7 Bankruptcy if You Exceed Illinois' Median Income


If you are experiencing serious financial difficulties in Illinois and your income is less than Illinois' median income, then you can file a Chapter 7 bankruptcy, if you meet other minimum criteria.

But if your income is greater than the State's median income, then you must take a means test to see if you can qualify to file Chapter 7 bankruptcy. Here's why:

Under the old version of the Bankruptcy Code, trustees and bankruptcy judges used their own discretion to say who could and could not qualify to file a Chapter 7 bankruptcy. As a result, they handed down a broad range of inconsistent rulings, which caused consumers to "shop around" for the best jurisdiction in which to file their bankruptcy.

In the new Bankruptcy Code, Congress included a means test, which determined whether a debtor had the ability to repay his creditors. If he could satisfy his debts, then a Chapter 13 repayment plan was appropriate. If not, then he qualified for a Chapter 7 liquidation.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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