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What is the means test?

If you want to file Chapter 7 bankruptcy in Iowa, you must pass something called the means test. This was a requirement created when the bankruptcy laws were overhauled. According to NerdWallet, it is designed to help ensure only people who cannot afford to pay off their debts can file Chapter 7. If you do not pass the means test, you will have to file Chapter 13.

It begins with checking your income. There is a set income level that is considered a median income limit. If your income comes in under that limit, you pass the means test. You will be allowed to file Chapter 7 because you do not have the means by which to pay back your debts. However, if you fail this part of the test, you will need to go through part two.

Part two involves looking at your expenses. It will consider all the things you make payments on each month. It is your job to ensure you provide complete and truthful information. Your case can be thrown out if you lie about any expenses. You also cannot go back and add in expenses once you have submitted the information, so make sure you have listed everything you are allowed to under the law. Your expenses are then weighed against your income. If your disposble income is less than the allowed amount, you pass the means test and can file Chapter 7. Otherwise, you fail and must file Chapter 13. This information is only intended to educate and should not be interpreted as legal advice.

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