The Bankruptcy Means Test
The Bankruptcy Means Test operates in two ways:
- It will determine if you qualify for Chapter 7 Bankruptcy; and/or
- If you do not qualify for Chapter 7 Bankruptcy, the means test establishes what you are required to pay your creditors in a Chapter 13 Bankruptcy.
What is the Means Test?
The means test is based on income and was established as part of the amendments to the Bankruptcy Code, and enacted by Congress in 2005 (BAPCPA). The means test takes into consideration the individual’s income for the six months preceding the month prior to filing.
If your income is less than the median income level, then you are presumptively eligible to file a Chapter 7 Bankruptcy
In Georgia, the current median income for a family size of 4 people is $85,763.00. For a family of 2, it is $63,850.00. If your income exceeds the median income level, you may likely be required to file a Chapter 13 Bankruptcy.
A majority of the deductions that are taken on the means test are standardized. Some of the actual deductions that can be taken are: income taxes, health insurance, mandatory retirement accounts, court-ordered domestic support and care for an elderly/ill/disabled household member.
Talk to a Bankruptcy Attorney
A qualified bankruptcy attorney will work with you to determine your eligibility for a Chapter 7 Bankruptcy, and will explain the pros and cons of Chapter 7 Bankruptcy versus other alternatives. Your attorney will help you complete and submit 2 forms: Chapter 7 Statement of Your Current Income and the Chapter 7 Means Test Calculation Form. Even if you do qualify for a Chapter 7 under the means test, there are additional considerations as to whether a Chapter 7 is the best choice for you, your family and your current financial situation.