What is the means test in bankruptcy?

What is the means test in bankruptcy?

The means test in bankruptcy is a calculation that determines whether you qualify to file Chapter 7 bankruptcy in Georgia.  The Means Test is based on gross income your household received in the six months prior to the month you file bankruptcy.

Do you make too much to qualify for Chapter 7 bankruptcy in Georgia?

You might. Prior to 2005, the Means Test was a simpler affair, and most debtors filed Chapter 7 bankruptcy and received a full discharge of all debt. Post 2005, Congress passed laws designed to prevent debtors from filing Chapter 7 if their household’s gross income is determined to be sufficient to repay their creditors over a period of 3 or 5 years.

Qualifying for Chapter 7 bankruptcy based on the Means Test is a ‘bright-line.’ Your household’s median income is either above or below the median income for households of the same size in Georgia.

Above median income debtors are presumed to be ineligible for filing Chapter 7.  We can sometimes overcome the so-called ‘presumption of abuse.’  If we cannot, you must file Chapter 13.

Below median income debtors are presumed to be eligible for Chapter 7, but this presumption can be overcome by a trustee if the means test is inaccurate.

In order to determine income we look at your income in the six months prior to filing.  During our consultation, I will educate you about what ‘counts’ for your income and household size.

Beyond the bright line test and into Chapter 13. Your future income, expenses, secured debts, and certain other deductions are used to determine how much you’ll pay back creditors in Chapter 13–your disposable monthly income.  In the context of Chapter 13, the means test is used to determine the minimum plan payment.

Don’t panic if you think your income is too high to qualify for Chapter 7 bankruptcy. The thing to remember if you just read that sentence and hit the panic button is that you are expected to pay your creditors 100% of your disposable income.  You are not expected to pay your creditors 100% of debt you owe.

The means test in bankruptcy calculation is not to be taken lightly.  As your attorney, I will be defending the deductions we take.  I can not guarantee that the calculations we present will not be challenged.  But you and I will spend  a good deal of time ensuring that the data we put into the calculation is valid and that we can defend them.

Georgia’s median income for cases filed after April 1, 2015  is as follows:

Household size of 1–$41,650

Household size of 2–$53,684

Household size of 3–$58,799

Household size of 4–$69,170