Is My Income Low Enough to Pass the “Means Test” and Be Able to File a Chapter 7 Case in Texas?

The Easiest Way to Pass the “Means Test”

Most people who want to file a Chapter 7 “straight bankruptcy” can do so. Most pass the qualifying “means test” because their income is low enough. If you live in Texas, the next few paragraphs will give you a very good idea if your income qualifies you.

Start by Defining Two Terms

The “Means Test”: an income and expenses test to determine whether you qualify to file a Chapter 7 case. If you don’t pass the test, you are considered to have the “means” to pay a meaningful amount to your creditors through the other alternative, a three-to-five-year “adjustment of debts” under Chapter 13. Some sections of this test can get quite complicated, but those can be avoided if your income is simply low enough. If so, you can skip the rest of the “means test.”

“Current Monthly Income”: an unusual and very specific way to calculate your income for purposes of the “means test.” (See Section 101(10A) of the Bankruptcy Code.) Your income under this special definition is compared to the published “median income” for your size of family in Texas. If your income is no more than the median, then you’ve passed the “means test” (without having to go through the expenses part of it), and you will very likely qualify for Chapter 7.

Calculating Your “Current Monthly Income”

  1. Clear from your mind what you would naturally think of as your taxable income from the previous calendar year, or anything like that. Instead your “current monthly income” is calculated from the exact amount of money you received during the SIX FULL calendar months just before your bankruptcy case is filed. To illustrate, if your case is filed on May 24, 2013, add up every dollar you received during the six-month period from November 1, 2012 through April 30, 2013.
  2. During that six-month period, include virtually every bit of income you’ve gotten from all sources. This of course means employment income such as your gross salary, wages, bonuses, and tips; and any business income (gross business receipts minus “ordinary and necessary business expenses”). But it also includes income from almost all other sources, such as child and spousal support, insurance settlements, unemployment benefits, retirement income, cash gifts, and gambling winnings. The main exception: exclude any types of social security benefits.

When you’ve totaled up all the money received within those 6 full calendar months before filing, divide that by 6 to get your “current monthly income.”

Compare Your Income to the Texas Median Income Amounts

Now take your “current monthly income” and multiply it by 12 to come up with your annual income. Compare that amount to the median income amounts in Texas for your size of family in the following table:

* Add $8,100 for each individual more than 4
$41,225 $55,895 $60,503 $67,296

These amounts were effective starting April 1, 2013, and are updated about every six months. If you do not live in Texas, you can find the median income amounts for the other states through this website .

If your income, as calculated this particular way, is no more than the median income amount that applies to your state and family size, then you have passed the income part of the “means test.” That means you have passed the entire “means test”; you can skip the expenses part of it.

If your income is more than the median amount that applies to your state and family size, you may still be able to file a Chapter 7 case but that will involve the much more involved expenses side of the means test, which is way beyond what I can cover here.

Either way, if you live in Texas near Rockwall, Heath, Greenville, Lavon, Wylie, Mesquite, or Rowlett, please contact me, bankruptcy attorney Carrie Weir. I will go through these calculations with you to see if you pass the “means test.” Please call me for this and to discuss all your options in a free and confidential consultation at 972-772-3083 . Or if more convenient for you, feel free to use the contact form here . Thank you.

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