If you have consulted with an experienced bankruptcy attorney about taking this step then you have probably heard about the Means Test. What is this test though, and what does it mean if you fail it? The results will determine whether you can file for chapter 7 bankruptcy or whether you will need to use chapter 13 instead. This can have a big impact on the length of time your case will take and the typical outcome that can be achieved. The calculation is used to see if your income is too high for a chapter 7 petition or if you can use this option. If you fail the Means Test then you can choose to file under chapter 13 of the bankruptcy code but this will involve paying off at least a portion of the debts you owe.
Chapter 7 bankruptcy is usually preferred because this wipes out most if not all of your debts, without requiring you to make any payments at all to your debtors most of the time. Usually these cases do not involve property above the exemption allowances so all of the assets are covered. There is nothing left for the creditors, and your debts are discharged within 6 months in most cases. Chapter 13 is much more complex. Under this chapter of the code you must have an income and you will usually be required to pay on any debts for a specific period of time. This type of case can last 3-5 years before you finally receive a discharge.
Sometimes you may be able to use either chapter, and an experienced bankruptcy lawyer can provide advice in this situation. If you are not eligible for a chapter 7 filing and you need a fresh financial start then you can choose to file under chapter 13. This requires that you report all monthly income to the court, and manageable payments are determined based on this income. The court will look at your monthly income and expenses, and will decide what you need to pay. These funds will be used by the trustee to pay off some of the debts owed. After the repayment plan that the court has approved has been completed then any remaining debts are usually discharged.
Sometimes an experienced bankruptcy attorney may advise you to wait before filing, or to file immediately without delay. This could be based on certain circumstances that may affect the chapter of the bankruptcy code that you can use. If you are unemployed but looking for work you may be eligible to file under chapter 7. After you find a job you may fail the Means Test due to the new income that you have acquired, so any filing delay could be costly. If you recently lost your job then the lawyer may advise you to wait, because the last 6 months of income must be reported. If you lost your job 4 months ago then delaying by 2 months could be the best possible move.