Passing the Chapter 7 Means Test Most Effective Tips?

Have your debts pilled up so much that it would take most, if not all, of your current monthly income to cover them? If so, it may be in your best interest to consider Chapter 7 bankruptcy to discharge eligible debts. However, before filing for bankruptcy under this chapter, a consumer must pass the means test to determine if they qualify for Chapter 7 bankruptcy.

Generally, the means test investigates a few important factors to determine whether filers (i.e., debtors) can pay back some of their debts and if they are eligible to file. These factors include your annualized monthly income, current disposable income, expenses, debts, and more.

Suppose mean testing determines you are not eligible for Chapter 7. In that case, you’ll have to file Chapter 13 bankruptcy (if eligible to file) if you still want to proceed in the bankruptcy process. 

If you’re considering bankruptcy or other forms of debt relief, give us a call to speak with a proven Florida bankruptcy attorney about your bankruptcy case. Continue reading to learn tips about the Chapter 7 means test.

What is the Means Test For Chapter 7 Bankruptcy?

As the name suggests, “means testing” determines whether individuals have the “means” to repay some or all of their debts. Generally, a Florida bankruptcy court wants to ensure individuals are not abusing the bankruptcy system, so they make sure anyone interested in filing Chapter 7 bankruptcy can pass the bankruptcy means test before filing.

If the means test calculation determines that you’re ineligible for Chapter 7 bankruptcy, you can still file for Chapter 13 bankruptcy if eligible. 

However, it’s essential to note that filers are not automatically eligible for Chapter 13. Currently (subject to change), they must have a verifiable regular income, unsecured debts less than $466,275, and/or secured debts less than $1,395,875.

How Does The Means Test Work?

Chapter 7 means testing is comprised of two parts. The first part of the means test compares your household annualized monthly income with the state median income for your family/household size.

If your income is less than Florida’s (or your state of residence, if different) median income for your household size, then you’ve essentially passed the means test and qualify to file for Chapter 7 bankruptcy. That typically means you don’t have to move to the second part of the means test. 

However, if you don’t pass the first part of the means test, you’ll need to move to step 2, which is a bit more complicated.

How is My Current Monthly Income Defined When Filing Chapter 7 Bankruptcy?

According to 11 U.S.C. § 101(10A), an individual’s current monthly income is defined as the average monthly income of Chapter 7 filers (and their spouse in joint bankruptcy cases) during the six months before filing for bankruptcy.

Generally, the following sources of income are considered when determining income, but not limited to:

• Gross income before payroll deductions (i.e., salary, wage bonuses, commissions, etc.)
• Alimony and maintenance payments
• Any other sources of regularly paid income for household expenses (including child support)
• Net income from your business, farm, property, and more.
• Investment interest and dividends (including royalties)
• The compensation received from unemployment benefits
• Retirement income (including pension payments)

It’s essential to note that income from Social Security (retirement, disability, or supplemental) is exempt from this calculation. 

How to Calculate Income For Chapter 7 Means Test

Suppose your income is higher than the median income of a household your size in your state. In that case, you’ll need to complete step 2 of the means test calculation (i.e., Bankruptcy Official Form 122A-2 Means Test Calculation).

This step aims to determine your disposable income over the previous five years. During this step, if the means test calculation shows that your monthly disposable income is equal to or less than national and local standards, you are eligible to file for Chapter 7 bankruptcy in Florida.

To pass the Chapter 7 means test (if your monthly income exceeds the state average for your household size), you’ll need to take the following steps:

Step 1: Find out your adjusted income

The means test isn’t based on your annual income, it focuses on your income over the prior six months to filing bankruptcy. The Means Test Calculation Form walks you step-by-step through using the Statement of Currently Monthly Income Form data to determine your adjusted income. Once completed, you’ll know the actual adjusted monthly income amount.

Step 2: Determine your average monthly living expenses

Calculate your expenses over the six months prior to filing bankruptcy to obtain an average. Expenses can include but are not limited to taxes, Social Security deductions, and general living expenses. It’s important to note that specific limits are placed on “living expenses.”

Step 3: Calculate your disposable income

Once you’ve added up all of your allowable personal expenses over the prior six months, divide the total by six. This will give you the average monthly living expenses. Once completed, subtract your average living expenses from your average monthly income (from the last six months), and you’ll have your average monthly disposable income amount.

How to Pass The Means Test For Chapter 7 Bankruptcy

The means test was passed into law to minimize the likelihood of bankruptcy abuse. With that said, you’ve “beat the means test” if the means test calculation determines that you have:

1. A lower average monthly income than your state (in this case, Florida)
2. You have a negative disposable income, or
3. Your disposable income is equal to or less than local and national standards

It’s essential to note that you could still qualify for Chapter 7 bankruptcy if your average disposable income is greater than $137 monthly.

However, you’ll need to show the court that you have special circumstances, or you’ll need to file for Chapter 13 bankruptcy and enter a repayment plan (if eligible). Further, in some instances, individuals are exempt from the means test calculation.

Contact A Chapter 7 Bankruptcy Lawyer Today

The Chapter 7 means test was enacted into law to ensure individuals don’t abuse the bankruptcy system, so it’s not always easy to pass. An experienced Florida bankruptcy attorney at Ziegler Diamond Law can advise you on whether it’s in your best interest to file Chapter 7 bankruptcy, Chapter 13 bankruptcy, or seek other debt-relief alternatives.

We know how confusing the Chapter 7 means test can be and are here to walk you through the process. Whether you need help understanding the bankruptcy process, filing paperwork, or qualifying for exemptions, we’re here to help.

Contact us today to speak with a Florida Chapter 7 bankruptcy lawyer you can trust.

Michael Ziegler Managing Partner

Michael Ziegler is the managing partner of Ziegler Diamond Law, serving consumers throughout Florida. With a focus on consumer protection, Michael helps clients navigate bankruptcy, defend against debt collection lawsuits, and address credit reporting errors. Known for his strategic approach and dedication to empowering individuals to regain financial control, Michael also chairs the Clearwater Bar Association's Small Firm section. Outside the office, he enjoys camping with his family and pursuing real estate ventures.

See Full Bio