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The Bankruptcy Means Test

What Is the Bankruptcy Means Test?

As of the 2005 Bankruptcy Act, the Means Test is the method to determine your eligibility for filing Chapter 7 bankruptcy. Applying the means test properly can be extremely difficult, due to the number of exceptions and exemptions that may affect the calculation.  However, in very general terms, the bankruptcy court will compare your average income for the 6 months prior to filing, as stated in the affidavit you are required to submit, to the median income for households of the same size in Florida. If your income is below the median, then you can file for Chapter 7. 

If your income is above the median and you still want to file chapter 7, then the longer version of the means test will be applied to determine if you still qualify for Chapter 7 or will be required to file for Chapter 13 instead. The longer form of the test takes into consideration other qualifying factors. For example, do you expect your income to continue at the current level or will it change in the near future? Was all or part of your income in the past six months the result of a one-time distribution? The median income for Florida changes regularly, so please contact us for the current median for your household size in Florida.

If you are unable to pay a minimum of $6,000, or $100 per month, over the next five years toward your unsecured debts, after you have paid your expenses, then you will probably qualify for Chapter 7 bankruptcy. But, should you have the ability to pay your unsecured creditors at least $10,000, or $166.67 per month, over the next five years, then you are probably not eligible for Chapter 7 and may need to file for chapter 13 bankruptcy instead.  Determining what qualifies as your expenses can be very complex and has a dramatic impact on your ability to qualify for chapter 7.  We can help you determine what exactly which expenses can be included and help ensure that if you are eligible, that you qualify for chapter 7.  

In the event that you have the ability to pay your unsecured debtors more than $6,000, or $100 per month, but less than $10,000, or $166.67 per month, over the next five years, then your ability to qualify for chapter 7 is determined by a mathematical calculation. If you do not have the ability to pay at least 25% of your unsecured debt, then you probably qualify for a chapter 7 filing. If you have the ability to pay 25% or more of your unsecured debt, then you will not qualify for Chapter 7. Unsecured debt is debt that has no collateral associated directly with it and includes such things as credit card debt, medical bills, utility bills, etc…. 

Even if you should qualify for chapter 7, you may still file for Chapter 13 instead; and under some specific circumstances this might be a better option.  

At the Rosenthal Law Group, our bankruptcy lawyers can guide you through the bankruptcy qualification process and help you determine the best option to meet your financial needs. Call us at 727.342.0347 or contact us online to arrange a free consultation with a St. Petersburg bankruptcy means test attorney.