January 26, 2015 By:
If you are considering bankruptcy, this blog can help you find out if you are among the many people whose income easily qualifies them for Chapter 7 “straight bankruptcy.”
Congress’s clear purpose behind the means test was to make it harder for some people to file for Chapter 7 bankruptcy. The idea was that those who have the means to pay a meaningful amount of their debt to their creditors in a three-to-five-year Chapter 13 payment plan ought to do so instead of being allowed to just write off all their debts in a Chapter 7 case.
The means test is a messy, multilevel test. The good news for most people is that once they pass the first level — comparing their “current monthly income” to the applicable “median family income” — they don’t have to mess with the rest of the test, particularly the complicated expenses portion of the test. If your income is no more than the median, then you can file a Chapter 7 case.
This is a very precise definition of “income” and one that can have odd consequences. Here’s how it is calculated.
1 EARNER-$40,389 2 PEOPLE-$54,762 3 PEOPLE-$59,276 4 PEOPLE*- $65,932
* Add $7,500 for each individual in excess of 4.
(These median income amounts are valid for cases filed from November 1, 2012, through the next time they will be changed, likely in March or April 2013. Check this website to see if these amounts have been adjusted and to determine the new median amounts.)
If your annual income, calculated exactly as described above, is no larger than the median income amounts for your family size in the table, then you have cleared the means test hurdle. You can skip the expenses portion of the test.
However, if your income is higher than the median income amount applicable to you, you may still be able to pass the means test at the next level. Then you may still be able to file a Chapter 7 case. See our next blog about that.
Or, to get an answer if you are in the Dallas-Fort Worth metroplex, call Attorney Carrie Weir at 972-772-3083 to schedule a no-obligation, free, confidential consultation. Or contact us here . We will apply the means test to your personal situation and discuss all your options.