Bankruptcy Means Test – Tucson Bankruptcy Attorneys

What is the bankruptcy means test?  Have you consulted an experienced Tucson bankruptcy attorney regarding qualifying for Chapter 7 bankruptcy?

Test 1:  Median Income for Household Size

There are two tests to determine whether you qualify for Chapter 7 bankruptcy.  The first test determines whether your six (6) month income prior to filing is less than the median income for your applicable household size.  If it is you will likely qualify for Chapter 7 bankruptcy.  Below are the median income figures as of November 15, 2013.  These numbers are subject to change so please visit the Department of Justice website for updated information.

Single Person Household:  $41,993

Two Person Household:  $54,000

Three Person Household:  $56,503

Four Person Household:  $64,604

Test 2:  The Bankruptcy Means Test

If your income is more than the state median for your household size you have to complete the “means test” to see if you qualify for Chapter 7 bankruptcy.  There are few exceptions to having to complete the means test which include disabled veterans who were on active duty or performed homeland defense activities, National Guard and reservists who were called to active duty or performed homeland defense activities or those whose debts are primarily non-consumer.

The purpose of the means test is keep high income filers from filing Chapter 7 bankruptcy.  Those that do not qualify for Chapter 7 bankruptcy under the means test are left with filing Chapter 13 bankruptcy (or another Chapter) where it is required that you repay some or all of your unsecured debt through a three to five year repayment plan.  The means test determines how much disposable or left over income you have by deducting certain monthly expenses from your current monthly income.  If you fail the means test because your disposable income is more than what is allowed then you cannot file for Chapter 7 bankruptcy.  Most people prefer to file Chapter 7 bankruptcy as opposed to Chapter 13 bankruptcy because you do not have to repay your unsecured debt in Chapter 7.

Just because you pass the means test does not mean you qualify for Chapter 7 bankruptcy or that Chapter 7 bankruptcy is your best course of action.  For example, you may be precluded from filing Chapter 7 bankruptcy because of a previous filing.  You should consult an experienced Tucson bankruptcy lawyer to see if you qualify for Chapter 7 bankruptcy and whether it is your best option.