Chapter seven bankruptcy (or “straight liquidation”) is the most common form of bankruptcy filing in New York and around the U.S.
Thanks to the “means test,” however, it’s slightly less frequently used than it used to be. That’s because the means test for Chapter 7 bankruptcy was essentially put in place by the credit industry in the 2005 bankruptcy law to be a speed bump intended to reduce the ability of people to seek bankruptcy protection.
The purpose of the means test is to figure out if you could pay a sufficient amount back to your unsecured creditors after expenses, exemptions, etc. have been subtracted out. If the calculations show that you would be able to do so, then you “fail” the means test and are not eligible to file for Chapter 7.
Of course, the means test is not really just a matter of doing some simple calculations. The key, just like with tax accounting, is figuring out what gets counted and how it gets characterized. And that’s where a good New York Chapter 7 bankruptcy attorney comes in handy.
Chapter 13 vs. Chapter 7
It is often considered more advantageous to a debtor to be able to file for Chapter 7 rather than Chapter 13 because typically within several months you’re done with your case, your debt has been wiped clean and you’re moving forward with your life. Chapter 13, meanwhile, has its strategic advantages as well depending on your situation. But it does involve a 3 to 5 year repayment plan which is frequently less appealing than the shorter time frame of a Chapter 7.
If you have questions about Chapter seven bankruptcy, Chapter 13 or questions about the means test in for Chapter 7 bankruptcy attorney Brooklyn NY, please feel free to contact Bruce Weiner, an experienced New York bankruptcy attorney in Brooklyn, for a free initial consultation