If extensive debts have placed you in a precarious financial situation, a Chapter 7 bankruptcy might help re-establish you by allowing for certain debts to be discharged. Is for this very reason why Chapter 7 remains the most popular option for those seeking bankruptcy protection in Virginia Beach (and throughout the rest of the country, for that matter). Yet in order to file under Chapter 7, you must first pass the means test. 

What is the Chapter 7 means test? It is a method put in place by federal lawmakers to keep people from abusing the privilege afforded by Chapter 7. Abuse is assumed if your income is above a certain point that is deemed as indicative as you being able to settle your liabilities. 

According to the website for the Administrative Office of the U.S. Courts, before the means test is even applied, your current monthly income is compared to the median for your demographic in your state. If it is below that amount, you automatically qualify to file under Chapter 7. If it is not, then your income is aggregated over a 5-year period. If the total amount is more than 25% of your non-priority unsecured debt (if that debt amount is more than $7,700) or $12,850, then you do not qualify. 

What would happen in such a scenario? Depending on your current financial situation, the court could opt to dismiss your case. Yet the most likely scenario would be you being asked to convert your case over to a Chapter 13 bankruptcy. This would provide you with the same protection from collection efforts available under Chapter 7; the difference would be that you would be required to repay your debts over a period of 3-5 years.