The Means Test in a Chapter 7 Bankruptcy Filing

Filing Chapter 7 Bankruptcy

There’s a common and persistent misunderstanding about the U.S. bankruptcy laws—one that insists that anyone can file at any time and escape liability for their debts. In fact, under the considerable revisions to the bankruptcy laws in 2005, anyone seeking to permanently discharge debts in a Chapter 7 proceeding must first qualify by submitting to a “means test.” The means test looks at a number of different factors to ascertain whether the debtor has the “means” to repay creditors over a three-to-five year period. If so, the debtor may not file Chapter 7, but must seek to restructure debt in Chapter 13.

How the Means Test Works

To determine whether a debtor has the necessary “means,” the law requires a calculation of the debtor’s current monthly income and compares it to the “median income” level. Median income level is based on U.S. Census figures and varies from state to state. The current monthly income represents a summary of all income for the last six months, from any source, including:
• Wages and income
• Unemployment compensation
• Alimony or child support
• Interest, dividends or other investment income
• Insurance payments

Once the total income for the last six months is calculated, it’s divided by six to get current monthly income. If current monthly income is below the median income, the debtor automatically qualifies for a Chapter 7 filing. A person’s income may be above the median income, but the debtor may still qualify, based on other factors.

Contact Heath, TX Bankruptcy Attorney Carrie Weir

I offer a free initial consultation to all potential bankruptcy clients. Contact my office by e-mail or call me at 972-772-3083 for a private meeting. With offices in Rockwall, Texas, I represent clients in Heath, Greenville, Lavon, Wylie, Mesquite and Rowlett.

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