How the new test for measuring a debtor's ability to repay would work under the bankruptcy (search) overhaul legislation:
— People with insufficient assets or income as determined by the test could still file a Chapter 7 bankruptcy (search), which, if approved by the court, would erase debts entirely after certain assets are forfeited.
— People with income above their state's median income who can pay at least $6,000 over five years — $100 a month — would be forced into a Chapter 13 bankruptcy (search), where the court would order a repayment plan.
The U.S. average for median household income was $42,654 a year for 2001-02. State median incomes range from $29,752 in West Virginia and $30,761 in Mississippi to $53,791 in Connecticut and $55,525 in Alaska.
Under current law, a bankruptcy judge determines under which chapter of the bankruptcy code a person falls — whether they have to repay some or all of their debt.
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