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I failed the means test. What happens next?

Consumers often get uneasy when they fail the means test to file a Chapter 7 bankruptcy, but in actuality, it can be a positive thing rather than a negative indicator. For one, it means that you have a good income, as that can ease you through the Chapter 13 bankruptcy process.

For another, it means that you no longer have to worry about an asset seizure and sell-off in order to repay your creditors. You can keep your possessions, even those considered to be luxury items that would otherwise be sold in a Chapter 7 bankruptcy. You will also have as long as five years to pay off the debts you've accrued.

In some cases, a filer may have initially qualified to file under Chapter 7 but winds up having their case converted during the pendency of the proceedings to a Chapter 13 by the bankruptcy trustee. This can happen if a trustee later discovers that a debtor has sufficient income to repay their debts.

When filing a Chapter 13 bankruptcy petition, debtors must include their plan to repay their mandatory debts. Those typically include all priority and secured debts and part of the debts owed to unsecured and nonpriority creditors.

Sometimes, debtors initially intend to file under the provisions of Chapter 7 only to learn after consultation with an attorney that the better choice for their financial circumstances is to file under Chapter 13.

Bankruptcy law is complex, and the bankruptcy code is subject to alterations by Congress. It is prudent to seek the counsel of an experienced bankruptcy law attorney in order to take advantage of all of the debt relief that is allowed under the law.

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