What if I Don’t Pass the Means Test for Chapter 7 Bankruptcy?

This video features David Shuster, a Bankruptcy attorney based in Texas.

Texas Bankruptcy Attorney Says Chapter 13 Could be Viable Alternative 

Video Transcript:

Rob Rosenthal: 

If you don't pass the bankruptcy means test, can you still file or are you out of options? That's what we asked Dallas lawyer, David Shuster for this Ask the Lawyers Quick Question.

David Shuster:

Yeah, if you don't pass the Means Test, then that essentially your remedy under the bankruptcy code is to file Chapter 13 because your disposable income is too high and you do have the means to repay the credit or something. The question is, okay, what does that mean? Do have to repay the creditors everything? No, the Means Test will continue to serve a purpose in determining the percentage of the debt that you're legally required to repay, so typically if you go through the means test, you fail it, you can't do a chapter seven, then we examine your options under a Chapter 13, allowing you to contribute to your retirement plan and again, still using all those necessary expenses, but at the same time determining how much you have to repay the creditors and a more ideal amount would be something closer to 50%. You still have options, you can settle the debt directly, or the nice thing about a Chapter 13 versus settling that directly is you're just in that plan, no creditor can contact you or sue you, you have the automatic stay during the duration of that Chapter 13 plan.

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