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Bankruptcy filing must meet "means test" standards

Most people in Washington and throughout the country find it compelling to file for consumer bankruptcy relief due to losing a job, incurring massive medical debt, marital dissolution or taking on huge credit card debt. When the debt is in the foregoing categories and is unsecured, Chapter 7 is usually the remedy sought because unsecured debts are erased absolutely and permanently in that kind of filing. Changes to the bankruptcy laws in 2005 now make it more difficult, however, for an individual or married couple to be approved for a Chapter 7 filing.

The filer(s) must pass what is called a means test to qualify for filing. This generally means that they cannot be above a certain average earnings earmark for individuals and couples in the state of residence. Thus, if they make too much money, they cannot file a Chapter 7, and the option available would be to file a Chapter 13, which generally is easier to qualify for because you will make a payment plan in this kind of bankruptcy.

The filer in a Chapter 13 must propose a plan that will consist of monthly payments for a period of three to five years. At the end of the payments, the arrearages on all secured debt will be paid off, and secured loans, such as home mortgages and car loans, will be fully paid. At the same time, the payments on such loans will be current and will continue to be made after the bankruptcy. Unsecured debt is usually partially paid in a Chapter 13, and when the plan is fully performed, the balance of the unsecured debt is discharged.

In Washington State, several exemption options are open to the bankruptcy filer. This means that the law provides exemptions for various items of property owned by the bankruptcy filer, such that most filers do not lose any substantial belongings or furnishings. The best way to know precisely how the potential filer's bankruptcy will impact his or her debt and assets situation is to obtain a consultation with a consumer bankruptcy attorney.

Source:, "Thinking of filing for personal bankruptcy? Here is how it works", Judith Ohikuare, May 5, 2018

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