How Your Income and the Results of the Means Test Determine Qualifying for Chapter 7 Bankruptcy

If you’re in some financial trouble and are looking for relief, you may consider filing for chapter 7 bankruptcy. Generally, you can choose to file for bankruptcy relief when your expenses are greater than your income. In order to file for Chapter 7, you must meet the eligibility requirements by either passing a means test or proving low income.

Discharging Most Debts

When you file for Chapter 7 bankruptcy, you are may be able to discharge most of your unsecured debt and start over fresh. There are limitations to this, however, as Congress passed a bill in 2005 that prevents people from going out and accumulating a large amount of debt, all with the plan to file bankruptcy to be relieved of that debt. This is why there is an income limitation, and why you need to have more debt than income in order to qualify.

Passing the Means Test

If you do earn more than the state median and your debt is greater than your income, you’ll need to pass a means test in order to be eligible for relief under Chapter 7. The bankruptcy court uses a complex formula to determine your disposable income by deducting certain monthly expenses from your average monthly income over a six-month time frame. If you have a high disposable income, you’ll most likely be denied Chapter 7 bankruptcy relief.

For more information on filing for bankruptcy, including your options if you don’t qualify for Chapter 7, contact us. We will take a look at your financial situation to help determine which type of bankruptcy best suits you.



Please contact our law office concerning your case. The content of this article does not constitute an attorney-client relationship.