Bankruptcy Law – Chapter 7 Means Test Outline
Bankruptcy law compels debtors to pass the means test to be qualified for chapter 7 bankruptcy. The necessity of the means test allows bankruptcy courts to reserve chapter 7 filings for the most qualified applicants. The means test is a very intricate process with many nuances which cannot be ignored. This article will only outline some of the general steps in the means test and is not a complete description of the procedure. A debtor should consult a Tampa chapter 7 bankruptcy attorney for assistance with determining eligibility for chapter 7.
Typically, the first step a Tampa bankruptcy lawyer will take in determining a client’s eligibility is calculating the client’s average income for the most recent 6 months. If the average income is below the State’s median income the debtor will typically qualify for chapter 7 bankruptcy. However, if the client’s income is exceeds the State’s median income additional calculations will be necessary to determine eligibility.
If the client’s income is greater than the State’s median income the Florida bankruptcy attorney should calculate the client’s disposable income as the next phase in the means test. The disposable income is calculated by subtracting allowable expenses from the client’s six month average income. The Florida bankruptcy lawyer will then multiply that amount by 60 to predict the total disposable income for the next five years. If the estimated five year disposable income exceeds the State’s median income by $10,000 the client will generally not be eligible for a chapter 7.
Even if the client satisfies the first stage of the means test he may still be ineligible for chapter 7 bankruptcy due to any number of reasons. For instance, if the client’s disposable income exceeds 25% of the total amount of unsecured debt the debtor will be ineligible for chapter 7 bankruptcy.