Meeting the Chapter 7 Means Test Requirements

It’s been the law of the land for more than a decade, but there’s still a significant amount of confusion surrounding the application of the “means test” when you file for a Chapter 7 bankruptcy. Under the 2005 amendments to the bankruptcy laws, Congress made it a bit more difficult for a personal debtor to qualify to permanently discharge certain debts. Anyone filing a Chapter 7 petition must now satisfy the “means test,” showing that he or she lacks the means to pay off the debt in a three-to-five-year period. If that cannot be shown, the only recourse is a Chapter 13 filing.

So how do you know if you meet the means test? There’s a simple way to determine your eligibity.

The Median Income Test

Pursuant to the bankruptcy code, if your “current monthly income” is less than the median family income level in your state, you qualify to file for protection under Chapter 7. If you meet that test, you don’t have to look at any other criteria. The U.S. Census annually determines and publishes the median family income on a state by state basis.

Identifying your “current monthly income,” though, can be far more complex that you think. You’ll need to put together a summary of all your income for the last six months, from any source, including employment, unemployment, child support, alimony, investments and insurance payments. You must then divide that number by six to get your current monthly income.

Contact Neuner & Ventura, LLP

At Neuner & Ventura, LLP, we know that the bankruptcy process can be intimidating and confusing. We offer a free initial consultation to every client. For an appointment, call our office at 856-596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.

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