Most Mississippi residents who file for personal bankruptcy do so through either a Chapter 7 or a Chapter 13 filing. If you wish to pursue a Chapter 7 bankruptcy, you must first take part in a bankruptcy means test. The test seeks to determine whether you are eligible to file for Chapter 7, which is essentially a liquidation of your assets, or if you must do so through a Chapter 13 filing.
A Chapter 13 filing differs from a Chapter 7 bankruptcy in a number of ways, but the main difference is that this type of bankruptcy involves you creating a repayment plan to pay back at least part of what you owe. If the means test indicates that you are not eligible for a Chapter 7bankruptcy, it may still reveal important information that may help you structure your repayment plan.
The first step of the means test
The means test takes into account your income and expenses to determine how much income you have available to put toward debts. It has two main parts, and the first part involves comparing your household income against the median income in Mississippi. If yours is the lower of the two, you automatically pass the means test and may move forward with a Chapter 7 filing.
The second step of the means test
If your household income exceeds the median one in Mississippi but you still wish to file for Chapter 7 bankruptcy, you must proceed to the second step of the means test. You must produce additional proof of your expenses and income during this step to determine how much disposable income you have to pay down debts. Depending on how much disposable income you have, you may or may not be able to move forward with a Chapter 7 filing.
Failing the means test does not automatically mean a Chapter 13 filing is your only option. You have the option of waiting six months before taking the test again, should you choose to do so.