Illinois consumers who want to file for Chapter 7 bankruptcy must first pass the “means test.” Introduced by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, the means test determines whether or not a consumer qualifies for Chapter 7 bankruptcy. Two things, your income and your debt behavior, matter the most when it comes to passing the means test. Because potential Chapter 7 filers must pass this test, it is important for them to understand the requirements. In fact, this is one of the best ways to determine whether you should pursue Chapter 7, Chapter 13, or a bankruptcy alternative.
How the “Means Test” Determines Whether or Not Illinois Consumers Qualify for Chapter 7 Bankruptcy
When Illinois consumers undergo the means test, a court-appointed trustee analyzes their finances and recent debt behavior. This trustee looks at a number of factors, but they primarily concern themselves with two big questions. 1) Are you actually incapable of paying your debts without bankruptcy assistance? And 2) Is your Chapter 7 bankruptcy filing an attempt to abuse the system?
Here is a breakdown of how trustees determine the answers to these questions and, ultimately, Chapter 7 bankruptcy eligibility in Illinois.
Are you above or below the median income in Illinois?
The median income for a state refers to the average (gross) household income. In Illinois, the median income is currently $59,588. This is important information for potential Chapter 7 bankruptcy filers because, in most cases, you will not pass the means test if your income exceeds this number.
Occasionally, the court will allow someone who falls above the median income to proceed with a Chapter 7 filing if they prove extenuating circumstances. Otherwise, they convert cases belonging to high-income filers into Chapter 13 bankruptcies.
Does your financial history indicate potential bankruptcy abuse?
Another function of the means test is to disqualify Illinois consumers who intentionally rack up a lot of debt with the intention of having it discharged in bankruptcy. For this part of test, trustees look for the following red flags.
- The purchase of more than $500 in luxury goods within 90 days of filing.
- Evidence of cash advances or payday loans that exceed $750, taken out within 90 days of filing.
- Credit cards that were maxed out right before filing.
- Any new lines of credit that appeared just prior or immediately after filing.
If a trustee flags an account as suspicious, the court may declare it non-dischargeable. This means that even if you are allowed to proceed with the Chapter 7 bankruptcy filing, you are still responsible for this debt. Or, if an Illinois filer has several accounts flagged, the court may convert their case into a Chapter 13 filing. Or, they may reject the case entirely.
Why Chapter 7 Bankruptcy Filers in Illinois Should Check their Credit Reports After Discharge
Illinois consumers who complete Chapter 7 bankruptcy filings should check their credit reports immediately after discharge. Under the best circumstances, creditors and the credit bureaus often mishandle consumer information and create errors on credit reports. Unfortunately, after bankruptcy, these mistakes happen even more frequently.
Chapter 7 bankruptcy filers in Illinois working to rebuild credit scores should make sure that inaccuracies aren’t bringing their scores down. So, after discharge, they should go to www.annualcreditreport.com, and request free copies of their credit reports from TransUnion, Experian, and Equifax. The Fair and Accurate Credit Transactions Act (FACTA) entitles you to do this once every 12 months.
If, while going over your credit reports, you see that discharged debts are inaccurately reported or any other type of mistake, contact Credit Repair Lawyers of America in Illinois. We help Chapter 7 bankruptcy filers get clean credit reports every day, and look forward to helping you next. Just give us a call, and one of our credit pros will set you up with an experienced credit attorney who will fix your credit issues quickly, legally, and for FREE.
The Free and Legal Way to Get Better Credit After Chapter 7 Bankruptcy
Don’t let post-bankruptcy errors on your credit reports bring your credit score down. At Credit Repair Lawyers of America, we’ve been cleaning up credit reports for consumers since 2008 for free. How do we do it? All of our fees come from the defendants in settled cases. This is why our clients pay nothing for the work we do.
Let’s start the conversation about what we can do for your credit. Set up your free consultation today by calling Attorney Gary Nitzkin at (773) 360-0665 or sending him a message through our contact page.
For more information about Free Credit Repair, please visit https://www.creditrepairlawyersam.com/illinois/credit-repair/.