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A quick bankruptcy filing can erase all of your debt, make the bill collectors stop calling, and give you a free pass to a better future. This is how many people think about chapter 7 bankruptcy, but then they learn about the Means Test. For some, this test bursts the bubble of hope and puts a price tag on that pass to a better future.

What is the Means Test?

The means test uses three factors to determine whether you are financially allowed to go through with a chapter 7 bankruptcy filing:

• The median income for households of your size in your state.
• Your total income.
• Your expenses.

In order to be considered eligible for chapter 7 bankruptcy filing you have to meet one of these criteria:

• Your total income is less than the median income for a family of your size in your state.
• Your income is higher than the state median, but you have enough expenses to justify a bankruptcy filing at this time.

The basic goal of the means test is to make sure that people who have enough disposable money to pay their bills are not able to file for chapter 7 and erase debt just to get out of paying. If you have the ability to free up some of your income and pay back your debt, then you should be forced to do so.

If you have enough free income to pay back some of your debt but not all of it, then you will likely be suggested for a chapter 13 bankruptcy filing rather than the chapter 7 filing. Chapter 7 completely erases away your debt while chapter 13 allows you to restructure the payback so it is more affordable to your current income.

Being deep in debt can feel hopeless. To make matters worse, there are lawyers who advertise on radio and television who promise to make everything better through the magic of bankruptcy. All you need to do is call their toll-free telephone number for a no-obligation consultation and you’ll be on the road to financial freedom. While there may be rare cases where it can help, here are 10 things you should know before filing for bankruptcy.

1. It is not the ultimate solution to your money problems. You may be able to get rid of your debt, but you will only be treating the symptom of your problem and not the cause. Chances are it wasn’t entirely your fault that you went into debt, but there are also things you could have done differently. Learning new spending and saving habits is a vital step to regaining control; whether you end up filing for bankruptcy or not.

2. Declaring bankruptcy is much harder than it used to be. The bankruptcy law changed on 200?. There are more hops to jump through, and it’s not an easy process. You can always try a do-it-yourself bankruptcy, but they have made it so complicated that you’re practically forced to hire a lawyer.

3. There is more than one kind of bankruptcy. When it comes to normal consumer debt, there is Chapter 7 and Chapter 13 bankruptcy. To put it in simple terms: Chapter 7 wipes the slate clean, and Chapter 13 sets up an affordable payment plan.

4. You must qualify before filing. Not everybody can file for Chapter 7. That’s because one of the steps is to pass a “means test”. The main purpose is to see if you are capable of paying off your debts under Chapter 13, or if you are “poor” enough to use Chapter 7. The catch is that the courts get to decide what you can afford; not you.