Means Test

What is the “Means Test?”

The means test has really gotten a bad rap because of it’s name. It’s really not that mean! Most people pass it and can file a Chapter 7 bankruptcy. It is, however, a key feature of the 2005 BAPCPA bankruptcy amendments. It incorporates state median income figures to determine who should pay back some of their debts in a Chapter 13 plan. Prior to BAPCPA, almost anyone could choose to file a Chapter 7 bankruptcy. Because of “perceived” abuse of the Chapter 7 Bankruptcy protection, the law now includes a test, to determine whether an “assumption of abuse” exists. Whether an assumption of abuse exists will determine whether you may, or may not, be eligible to file Chapter 7 bankruptcy.

The Chapter 7 means test applies to individuals whose debts are predominantly consumer debts. Consumer debts are obligations such as credit cards, auto loans and mortgages.

So how does it work? The Chapter 7 means test compares a family’s income and allowable expenses against the official median income for other households of the same size in the state of Florida. If your income exceeds the Florida median income for a family your size, then you didn’t pass the means test. But, the Chapter 7 “means test” is a two-part test and the income comparison is only the first part. If you make more money than a comparable family according to the figures, it doesn’t necessarily mean that you won’t qualify to file a Chapter 7 Bankruptcy. It just means that you have to calculate the second step of the Chapter 7 means test and determine your disposable income.

In the second part of the test, you are able to deduct the IRS standards for common household expenses from your income. You are also able to deduct all secured debt that you are contractually obligated to pay on the day you file. You also get to deduct some other qualified expenses that would be too tedious to get into here. The majority of people who have to go on to the second part of the test pass it once all the allowable deductions are factored in.

Taking the “Mean” out of Means Test

The means test can be complicated and hard for most people to understand. A Fort Lauderdale bankruptcy lawyer will ensure that your calculations are correct and that you’re filing under the correct bankruptcy chapter.

Bankruptcy statutes are in place to help prevent abuse of the system. If your situation is legitimate, you do not need to fear the means test. These steps are a necessary component of filing bankruptcy in any state. It is part of the process and remember, it is a means to an end.

The Bankruptcy Law Firm of Clare Casas handles bankruptcy cases in Miami, Fort Lauderdale, Plantation, Pembroke Pines, Sunrise, Coconut Creek, Davie, Dania, Deerfield Beach, Hallandale, Inverrary, Lauderdale-By-The-Sea, Lauderdale Lakes, Lauderhill, Margate, Lighthouse Point, North Lauderdale, Miramar, Hollywood, Oakland Park, Pembroke Park, Cooper City, Tamarac, Weston, Wilton Manors, Pompano, Coral Springs, Boca Raton, Delray and South Florida.

Call today for an appointment with our Fort Lauderdale bankruptcy lawyer!