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BANKRUPTCY MEANS TEST AND QUALIFICATIONS means
test, chapter 7 means test, bankruptcy means test, qualifications for bankruptcy
A People’s Choice can save you hundreds of dollars by preparing your
bankruptcy documents instead of an expensive bankruptcy attorney!
Bankruptcy Learning Center
Our online learning center provides quick access to valuable information contained in our web
site, California and Federal Codes, Court web sites and other legal sources of information.
Debt Restrictions for Chapter 7:
There are no minimums or maximums of indebtedness a person must have to file a
Chapter 7 Bankruptcy. The decision to file is clearly an individual choice often based upon an individual’s life situation and activities being taken by creditors.
Debt Restrictions for Chapter 13:
Unlike Chapter 7, not everyone who wants to reorganize their debts may be eligible to
file a Chapter 13 Reorganization. An individual, even if self-employed or operating an unincorporated business, is eligible for
Chapter 13 relief as long as the individual’s unsecured debts are less than $360,475 and his or her secured debts are less
than $1,081,400 (effective 4/1/10). (Note: These amounts are adjusted periodically to reflect changes in the consumer price
index (11 USC Section 109(e)). A corporation or partnership may not be a Chapter 13 debtor. A husband and wife may file a joint petition or individual petition (11 USC Section 302(a).)
The Income Means Test:
Under the new rules, the first step is determining under which Chapter of the Bankruptcy Code
a debtor is able or desires to file. The guide to determine whether a debtor qualifies to file bankruptcy is known as the “Means Test.” The Means Test calculation measures a debtor’s "current monthly income" against the median income for the
same size of family in the state in which the debtor lives. If a debtor’s income is less than the median for the debtor’s
household size, the full Means Test does not apply. In most situations, debtors who desire to file bankruptcy usually fit within the allowed income requirements under the new laws.
 Under the "Means Test,” if your current monthly income is less than the median income in
your state, you are eligible to file for bankruptcy under Chapter 7. For example, in California as of November 1, 2010, an individual who earned less than $47,234 per year could file
Chapter 7. A family of two could earn $61,954; a family of three $67,562, and a family of four $77,596. To access specific information regarding the current income requirements
and median income for California and other individual states, click here. The Means Test
figures are generally updated twice a year.
If your current monthly income is above the median income in your state, however, there is
a second step to the Means Test that determines a debtor’s “disposable income” and may
bring a debtor within eligibility of the Means Test standards. One of these factors is whether, based on the Means Test
calculations, you can afford to pay $100 per month toward paying off your debt. For debtors over the allowed income, the
Means Test formula takes into consideration your monthly income, various expenses (secured indebtedness, child care,
healthcare costs, income tax deductions, etc.) and the total amount of your unsecured debt. Debtors that do not “qualify”
under the new rules may not be eligible to file a Chapter 7, and may have to pay back some or all of their debts over a 3- to 5-year period under a Chapter 13 repayment program.
Means Test Pitfalls:
"Current monthly income" as defined by the bankruptcy laws, may not necessarily reflect a debtor’s
current income at the time they file the bankruptcy. Average income is calculated based on a debtor’s average income over the last six months before they file.
For people who are filing for bankruptcy because they recently lost a job, their
"current monthly income" according to these rules most likely will be much more than they take in each month by the time they file for bankruptcy.
A People’s Choice can save you hundreds of dollars by preparing your
bankruptcy documents instead of an expensive bankruptcy attorney!
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