Chapter 7 Bankruptcy: What Is the Means Test?

| Articles

If you’re considering filing for Chapter 7 bankruptcy, one of the first steps your bankruptcy attorney will recommend is completing the Means Test. This is a crucial step, as it determines whether you actually qualify for Chapter 7 bankruptcy or if you should instead consider filing for Chapter 13.

The Means Test can seem daunting, but relax. With the help of an experienced bankruptcy attorney, it won’t be as stressful.

Why Is The Means Test Used?

The Means Test is a financial assessment used by the bankruptcy court. It determines if your income is high enough to allow you to repay some debts through a Chapter 13 repayment plan or if you qualify for a complete debt discharge under Chapter 7.

Two Stages of the Means Test

The Means Test consists of two stages to determine your income and which form of bankruptcy best fits your financial situation.

  • Stage 1: Determining Your Media Income: In the first stage, the court compares your average monthly income over the past six months to the median income for your household size in your state. If your income falls below the median, you will likely qualify for Chapter 7. If you are above the media, you must complete Stage 2. When completing this step, you must gather all your financial information and documents to show your income and expenses.
  • Stage 2: The Means Test Calculation: If your income is above the median, you need to take another step to qualify for Chapter 7 bankruptcy—the Means Test Calculation form. This form factors in your monthly income, allowable deductions for expenses (housing, food, etc.), and certain secured debts. It will calculate your disposable income amount. If this disposable income falls below a specific threshold, you may still qualify for Chapter 7.

It’s essential to work closely with your bankruptcy attorney during the Means Test process to ensure you list all expenses and understand your options.

Beyond the Means Test: Other Factors the Court Considers

While the Means Test helps determine if you qualify for Chapter 7 bankruptcy, it isn’t the only criteria the courts use. Bankruptcy judges have some flexibility to consider your situation. Some factors that might influence their decision include:

  • Unusual Expenses: Do you have documented high medical bills or unavoidable expenses that significantly impact your finances? The judge might take these into account when determining your income.
  • Debt Burden: The total amount of debt you owe, compared to your income, can also be a factor. A crushing debt load might influence the judge’s decision.
  • Assets: While Chapter 7 typically allows you to keep essential belongings, the judge might allow you to proceed with Chapter 7 bankruptcy if you have valuable assets that could be sold to partially repay creditors.

If you still don’t qualify for Chapter 7 bankruptcy after all of this, it’s OK. Your bankruptcy attorney will help you weigh your options and, if you choose, proceed with Chapter 13 bankruptcy. They can also help you look at other debt-relief options.

Let Us Help You

If you’re worried about qualifying for Chapter 7 bankruptcy, hire a trusted bankruptcy attorney to help you with the Means Test and other procedures. Call our lawyers at The Law Offices of Alexzander C.J. Adams, P.C. Our bankruptcy attorneys will help you understand Chapter 7 bankruptcy, how to qualify, and what steps must be taken.

We work for you, the people, and not institutions. Contact us for a free case evaluation or no-obligation consultation. We are dedicated to helping you overcome this minor bump in the road and assisting you in getting on with your life.

Font Resize