Chapter 7 Bankruptcy Means Test

The 2005 changes to the Bankruptcy Code instituted a gross income test or "means" test designed to limit those individuals eligible to file for Chapter 7 bankruptcy relief. With limited exceptions, to file for Chapter 7 bankruptcy, you must first pass the means test set out by the Bankruptcy Code. The Chapter 7 bankruptcy means test compares your current monthly income against the median income for households similar in size. If your current monthly income is equal to or less than the state's median income for people with households of a similar size, you can file for Chapter 7 bankruptcy.

According to the means test, current monthly income is the average monthly gross income for a household over the six-month period prior to filing for bankruptcy. Under bankruptcy law, gifts, financial assistance from family, income from a non-filing spouse or money from a temporary part-time job are also included in current monthly income calculations. However, Social Security income, child support payments and business-related expenses can all be excluded from the means test calculation.

If you are unsure whether or not you qualify for Chapter 7 bankruptcy, contact Orlando bankruptcy lawyer James H. Monroe today to schedule a free consultation.

What if My Current Monthly Income Exceeds Florida's Median Income?

If your current monthly income exceeds Central Florida's median income for households of a similar size, you may be able to claim certain deductions in order to qualify for Chapter 7 bankruptcy. Employing a complicated formula, certain expenses are deducted from your current monthly income in order to determine your net monthly income.

Once your net monthly income is calculated, it is assumed that this amount represents the money you have available to pay creditors. In general, the following kinds of costs are deducted when calculating net monthly income:

  • Transportation costs
  • Housing costs
  • Medical costs
  • Cost of child care
  • Health savings account
  • Tax withholding costs
  • Child support and spousal maintenance
  • Cost of certain utilities

What options are available to me if I cannot qualify for Chapter 7 under the means test?

Under Section 707 of the Bankruptcy Code, you may still be eligible to file for Chapter 7 bankruptcy even if you cannot pass the means test. If your debt is primarily non-consumer debt, you may qualify to file for Chapter 7 regardless of your income level as determined by the means test.

Many individuals not eligible to file for Chapter 7 bankruptcy may find satisfactory relief under Chapter 11 or Chapter 13 reorganization solutions. In fact, many individuals are able to catch up on past-due mortgage payments or satisfy tax debt using the tools available to them in a Chapter 13 reorganization solution.

Contact Chapter 7 Bankruptcy Attorneys at James H. Monroe, P.A. Today

Filing for bankruptcy involves a number of issues that must be taken into account. For more information on common bankruptcy concerns, filing for Chapter 7 and the means test, contact the bankruptcy attorneys at James H. Monroe, P.A. to schedule a free consultation.