Commercial Collections Blog

Bankruptcies: Chapter 7

When a commercial debt account files for bankruptcy, an issue to look at is whether the filing will place the debtor within the current monthly income guidelines as determined by the state of the filing. A debtor planning to file Chapter 7 must demonstrate that it doesn’t have sufficient earnings that would otherwise require a Chapter 13 bankruptcy. The process of determining a debtor’s income in this context is known as “The Means Test”. This test makes use of the debtor’s income in the six months leading up to the bankruptcy filing and is referred to as the debtor’s “current monthly income”