Who Needs to Pass the Bankruptcy Means Test?
If you are considering bankruptcy for yourself as an individual consumer, or for your business, you might have come across information about something known as the “means test.” You may be wondering who needs to pass the bankruptcy means test, and what is involved in taking and passing the means test. The short answer is that the means test is only required in Chapter 7 bankruptcy cases where individuals are filing, but our West Palm Beach bankruptcy attorneys can explain in more detail. And if you have any questions or concerns about taking and passing the means test, or determining eligibility for consumer or business bankruptcy, our firm is here to help.
Means Test for Individuals Planning for Chapter 7 Bankruptcy
The “means test” was instituted as a requirement for most individuals or consumers who are planning to file for Chapter 7 bankruptcy in order for the filer to show that a liquidation bankruptcy would not constitute abuse based on their individual circumstances. The means test is designed to determine whether you actually have enough income or resources to repay creditors more fully than the manner in which they would be repaid in a liquidation bankruptcy. If you do not have the resources to repay creditors more fully than what is required in a Chapter 7 case, then in general, you will pass the means test.
In sum, the means test is only required for individuals who have primarily consumer debt and who are planning to file for Chapter 7 bankruptcy. It is not for business planning to file for Chapter 7 bankruptcy, and it is not for individuals with primarily consumer debt who are planning to file for a type of reorganization bankruptcy (like Chapter 13 bankruptcy). Yet even if you are an individual with primarily consumer debt planning to file for Chapter 7 bankruptcy, you might actually qualify for this type of bankruptcy without taking and passing the means test.
Understanding How Means Testing Works
Before you even go through means testing, you will first consider your current monthly income in relation to Florida’s median income based on your family size. Your current monthly income for bankruptcy purposes is generally based on your gross income from the 6-month period prior to your bankruptcy filing. If your current monthly income is less than the Florida median income based on your family size, you do not need to go any further — you already qualify for Chapter 7 bankruptcy.
If your current monthly income is more than the Florida median income based on your family size, then you will complete the full means test. The means test involves filling out bankruptcy forms and going through calculations to determine your disposable income. From there, your disposable income will determine whether you pass the means test and can file for Chapter 7 bankruptcy.
Contact a West Palm Beach Bankruptcy Attorney Today
For anyone with questions about filing for bankruptcy in Florida, it is important to seek advice from one of the experienced West Palm Beach bankruptcy lawyers at Kelley, Kaplan & Eller. We represent clients in individual and business bankruptcies, and we can speak with you today.
Source:
justice.gov/ust/means-testing
