Understanding the Illinois Bankruptcy Means Test

The Illinois Bankruptcy Means Test is a crucial step for individuals considering filing for bankruptcy under Chapter 7 or Chapter 13. This test helps determine whether a debtor's income is low enough to qualify for Chapter 7 bankruptcy, which can eliminate unsecured debts like credit card bills and medical expenses, or if they must file Chapter 13 bankruptcy, which involves creating a repayment plan.

The Means Test in Illinois is based on the debtor's current monthly income (CMI) compared to the state median income for a household of the same size. This threshold is regularly updated, so it's important for potential filers to check the latest figures published by the U.S. Department of Justice or the Illinois Bankruptcy Court.

To conduct the Means Test, debtors need to gather their financial documents, including pay stubs, tax returns, and bank statements, to calculate their CMI. This figure is derived from the average of the past six months of income, including wages, pensions, rental incomes, and other sources.

If the CMI is below the median income for Illinois residents, the debtor qualifies for Chapter 7. However, if the income exceeds the state median, the debtor must complete additional calculations to ensure that their disposable income is low enough to qualify for relief under Chapter 7.

For those who do not pass the Means Test, filing for Chapter 13 bankruptcy may be an option. This route involves restructuring debts and establishing a repayment plan that lasts three to five years, based on the debtor's income and financial situation.

It's worth noting that certain deductions are allowed when calculating disposable income, including necessary living expenses, secured debt payments, and certain other expenses like healthcare or childcare. Understanding these deductions can significantly impact the outcome of the Means Test.

In summary, the Illinois Bankruptcy Means Test is a vital mechanism for assessing an individual's eligibility for bankruptcy relief. It's critical for potential filers to thoroughly prepare their financial information and consider consulting a bankruptcy attorney to navigate this complex process effectively.

By understanding the intricacies of the Means Test and ensuring that all financial information is accurately reported, individuals can make informed decisions about their bankruptcy options and find the best path toward financial recovery.