The Bankruptcy Means Test

Our Santa Rosa and Napa Bankruptcy Attorney Discusses Its Importance

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What is the Bankruptcy Means Test?

The Chapter 7 Statement of Current Monthly Income and Means-Test Calculation, commonly referred to as the “means test” is a mathematical equation to determine whether you are eligible for a Chapter 7 bankruptcy. Generally, if after the completion of the means test you have no disposable income, you may be eligible for a Chapter 7. On the other hand, if after the completion of the means test, you have disposable income, you are considered to have the “means” to pay a portion of your debts. Additionally, your Chapter 7 is presumed to have been filed in bad faith and will be dismissed by the court unless you can prove that special circumstances exist rebutting the presumption of bad faith. Only individuals with consumer debt are required to complete the bankruptcy means test.

The Chapter 13 Statement of Current Monthly Income and Calculation of Comment Period and Disposable Income is the Chapter 13 counter-part to the Chapter 7 means test. The Chapter 13 mathematical equation however, is used to assist in the calculation of the amount of your monthly payments to your unsecured creditors such as credit cards and medical bills and to determine the length of your Chapter 13 payment plan. Individuals with consumer debt or business debt must complete this Chapter 13 form.

If your household income for the preceding six months is less than the median income in your state for your household size, you are required to only to complete the income portion of the means test and it is deemed that you have no disposable income.

The means test is not a simple mathematical equation. It involves complex issues of law and is one of the most compelling reasons why you need Santa Rosa and Napa bankruptcy attorney Ellyn M. Lazar to assist you in the filing of your bankruptcy.

What Are Some of the Common Means Test Legal Issues for Chapter 7 or Chapter 13?

  • What is the size of my household? Household size determines your median income level. Although not in every case, it is generally advantageous to have a larger household. A modern day household may include a multiple generation family (mom, dad, children, grandparents, grandchildren), unrelated adults, a same-sex married couple, domestic partners, a single adult or a single parent with children.
  • What is included in my household income? Household income includes your wages, you spouse’s wages, pensions and retirement, unemployment, household contributions from a roommate or family member and under some circumstances, support payments. Social Security, VA and other non-common sources of income are not included.
  • What is deducted from my income in the means test calculation? In determining whether you have disposable income, various expenses are deducted from your gross monthly income. Such expenses include income tax withholdings, medical insurance, union dues, housing cost, household expenses, transportation cost, child support and daycare.

Why Do You Need Ellyn M. Lazar as Your Attorney?

If your Chapter 7 means test is not properly prepared, your Chapter 7 may be dismissed and you will not receive a discharge of your debts. In a Chapter 13 bankruptcy, your plan payments may be larger and have a longer payment term if your Chapter 13 means test is not properly prepared. Contact Napa and Santa Rosa bankruptcy lawyer Ellyn M. Lazar for a free means test consultation.

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