If you are an Iowa resident and you, like many others, are finding it difficult to dig your way out from underneath mounting debt, you may be giving some consideration to filing for bankruptcy in an effort to find relief. You may be familiar with the terms “Chapter 7 bankruptcy” and “Chapter 13 bankruptcy,” but you may not completely understand the two methods, or know which form might be available or a better option for you.

According to Nerdwallet, while the vast majority of modern bankruptcy filings are of the Chapter 7 variety, whether you can ultimately pursue a fresh financial start through this method depends on how you fare on what is known as the bankruptcy means test. Essentially, the means test takes a good, hard look at your finances and your ability to pay back your debts before determining whether a Chapter 7 filing is an option for you.

First, the means test will compare your household income against the media income for the state of Iowa. If your household income is lower, than you have already easily passed the means test. If your income is not lower than that of the average Iowa household, you will have to proceed to step two of the means test, which involves gathering careful documentation of your assets, expenses and so on.

Step two of the means test ultimately determines just how much “disposable income” you have at hand, with disposable income referring to any money you have after factoring out “allowable expenses,” or those you truly need to get through life. The amount of disposable income the means test reveals will determine whether you can proceed with a Chapter 7 bankruptcy, or if you should take a closer look at a Chapter 13 filing or other options.

This information about the bankruptcy means test is meant to educate you, but please do not view it as a substitute for legal advice.