Do I qualify for chapter 7? And what is this “means test?”

By Alfred Villoch, III, Esquire at Savage, Combs & Villoch, PLLC

Chapter 7 of the bankruptcy code allows you to discharge certain debts immediately upon order of the bankruptcy court. But to qualify for chapter 7, you must satisfy what is called the “means test.” If you cannot satisfy this means test, you must instead file for chapter 13 (or chapter 11). In a chapter 13 case, rather than the immediate discharge of certain debts, the bankruptcy court determines your monthly disposable income and you are required to pay over that monthly disposable income to the trustee for the benefit of your creditors over a 3 or 5 year period. So what is the “means test” and how do you qualify for chapter 7 for a more prompt discharge of your debts? The initial part of the means test depends on your household income and the number of people in your household. If your current monthly household income is less than the median income for a household of your size in your state, the bankruptcy court presumes that you are eligible to file for chapter 7 bankruptcy. Current Monthly Income is the monthly average of certain income that you (and if you are married, your spouse) received in the six calendar months before your bankruptcy filing. In Florida, the median income for one person is $41,939 for cases filed after May 1, 2014. For two people, the median income is $52,598. You can find more information at: http://www.justice.gov/ust/eo/bapcpa/20140501/bci_data/median_income_table.htm. If your household income is more that the median income for your state, you can still qualify for chapter 7 depending on your “disposable income.” What matters for disposable income purposes is how much money do you have left at the end of every month that could go towards paying off “unsecured” debts. 
In other words, can you afford, after expenses, to pay off at least $7,025 over the next 5 years ($117 per month over 60 months)? If you can, the law will require you to file for chapter 13 instead of chapter 7. As stated above, passing the means test simply gives you a presumption that you qualify for chapter 7. But the means test is just one factor (albeit a primary factor) that courts and trustees consider when reviewing cases for abuse. Even if you pass the means test, section 707(b)(3) allows a judge to refuse a chapter 7 discharge based on a “totality of circumstances,” which can include cases of excessive secured debts for luxury items or fraud in your bankruptcy paperwork, for examples. Whether you qualify for chapter 7 can be a very complicated matter. It is important that you hire an attorney to understand all of your options under state and federal law. If you feel the oppressive weight of debt, please visit Savage, Combs & Villoch, PLLC, at http://54d.d17.myftpupload.com/ for a free consultation!