The Chapter 7 “means test” determines whether you are eligible to file Chapter 7 Bankruptcy. The means test is a formula that is designed to stop people with high income levels and/or low monthly expenses from filing Chapter 7 bankruptcy. The test was designed to ensure that Chapter 7 is only used by people who are truly unable to repay their debts.
Before taking the means test, you can determine if your income is less than the median income for your household size in your state. If your income is lower than the median income level, you are eligible for Chapter 7 bankruptcy and do not have to take the means test. If your income is higher than the median income level, you have to take the means test to see if you are eligible to file Chapter 7 bankruptcy.
The basic formula for the means test involves deducting specific monthly expenses from your average income for the six months preceding your bankruptcy. This formula will determine your monthly “disposable” income. If you have a high amount of disposable income, you are unlikely to be eligible for Chapter 7 bankruptcy. Filers with higher income, and who fail the means test, may be eligible for Chapter 13 to repay part f other debts, but are not eligible for Chapter 7 which completely eliminates debt altogether.
You can find online versions of the means test to see if you may be eligible for Chapter 7. These tests may not always be accurate, and should not be substituted for legal advice from a bankruptcy attorney.
Richard Croce - Rich@rrc-llc.com
As a Connecticut Attorney, If I cannot help you, I will help you find someone who can.
In Chapter 7 bankruptcy, you get relief from all your debts. But, not all of you can file for Chapter 7 bankruptcy. In case you pass the means test, then only you can file for Chapter 7 bankruptcy. Otherwise, you will have to file Chapter 13 bankruptcy. Under means test your income is calculated. While calculating your income, the average of last 6 months income is taken into consideration. If your income is less than the median income of your state with same family size, then only you can qualify for Chapter 7 bankruptcy. Otherwise, you have to file Chapter 13 bankruptcy.
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