Understanding The Bankruptcy Means Test

If you are just exploring bankruptcy options, you may be overwhelmed by information and not even be able to determine if you can or should file for Chapter 7 bankruptcy or Chapter 13. To file for Chapter 7 bankruptcy, you must pass a means test. Many think that a means test will automatically force them into filing for Chapter 13 or may prevent them from filing altogether, but that is not necessarily the case.

The test was created in an effort of holding those who could pay off their debts through Chapter 13 bankruptcy responsible for paying at least part of their debts. Some approach the test with anxiety, but it is a necessary step in the process. It is beneficial to have someone with experience guide you through it.

Components Of The Means Test

Current Monthly Income – You need to determine your current monthly income. This is not your current income, but the average of your income over a period of time. You would calculate your average monthly income over a 6-month period.

Your State Median – You will need to know your state’s median family income. For a family of four in Missouri, the current median income for cases filed after November 1, 2016 is $80,161. In Illinois, the median income for a family of four is $90,080. The state median amounts change frequently so it is important to make sure you have the latest figures. Anyone with an income higher than the state median must take the means test unless they fall into an exception category.

Once you have your current monthly income minus your allowable expense you get what disposable income you have available to pay off debts. If you have enough in the courts’ eyes, you will not be able to file for Chapter 7 bankruptcy.

If your income falls below the median income, you can file for Chapter 7 bankruptcy, but that doesn’t necessarily mean you should. It is in your best interest to work with the experts at Westbrook Law Group to help sort out your financial situations and get moving on a better path. Call today for your free consultation.