Hafemeyer Law

Chapter 7 Bankruptcy: Mastering the Means Test

Part of almost every Chapter 7 Bankruptcy filing includes the means test. Lawmakers designed the test to limit Chapter 7 filings to only debtors who cannot repay their debts.  Debtors with consumer debt are generally required to complete the test, while those with mostly business debt are typically exempt from the means test.

Under the current bankruptcy code, debtors earning a monthly income that is lower than the median income set for each particular state for their household size are typically not required to complete the majority of the means test. Debtors that have income levels which are higher than the median income may still be eligible to file Chapter 7, but must qualify under the means test by answering the remaining questions. Calculations for debtors who have income that is greater than the state’s median income can be more complex.

What is the Means Test?

The means test involves a series of questions regarding the financial affairs of the debtor. Information about monthly income from employment, typical household size, and other monthly expenses is used to arrive at the total “disposable income” for the debtor each month.  Disposable income is the amount of income left over each month after paying all the allowed expenses.  If a debtor’s disposable income is too high, the court may not allow them to file Chapter 7. Median household income varies by state, county and even sometimes municipalities. Each state varies in the number and type of deductions that are allowed when calculating a debtor’s disposable income.

Debtors who do not meet the requirements of the means test to file chapter 7 may be eligible to file Chapter 13, which will require repayment of some of the debt they owe.

Performing the calculations required in the means test requires a strong knowledge of the bankruptcy laws and filing requirements. An experienced bankruptcy attorney who has the knowledge and expertise to direct a debtor down the path to a successful bankruptcy filing can help to ensure a successful adjudication and a discharge of debts.

For assistance in determining if you may be eligible to file Chapter 7 and any of your questions regarding bankruptcy, contact Jessica at 507-384-3215 or jessica@hafemeyerlaw.com.

Source Article:


Speak Your Mind

Tell us what you're thinking...

You must be logged in to post a comment.