Filing Chapter 7, Will I Qualify?
For filing chapter 7, your income and expenses must meet certain guidelines, demonstrating that you are unable to pay your debts. One of the requirements for filing Chapter 7 is passing what is known as the “Median Income Test,” otherwise known as the "Means Test." The Means Test numbers are adjusted annually, so be sure to consult with the Law Office of Andrew Harris to see if you and your family qualifies.
The first method of passing this test is by demonstrating that your income is below a certain median level. Your “income”, for bankruptcy purposes, is the total gross income received from all regular income sources over the six months prior to the month your petition is filed, divided by 6, then multiplied by 12. If your “income” is lower than the most recent median income figures (published by the Census Bureau and adjusted for inflation each year), for your family size for your county and state, you meet one of the requirements to file Chapter 7.
For example, if you are an Deschutes County resident, your family size is 3, and your household’s income is $50,000.00, you would be eligible to file Chapter 7 since your income for your family size is below the current median. See the table below (these numbers are updated and valid as of 11/1/2015):
*You are allowed to add $8,100 for each individual in excess of the chart.
The second method of passing the “Median Income Test” is by demonstrating that after all of your “allowed living expenses” are deducted from your “income”, you are left with an insufficient amount to make payments to your creditors. This is known as the Means Test portion of the Median Income Test. You're “allowed living expenses” are based on IRS standards. If the amount left over after the deduction of your “allowed living expenses”, multiplied by 60, is less than about $6000, then you most likely are eligible to file a Chapter 7.
However, if your disposable income is greater than $10,000 over the next five years, a presumption arises that you don’t really need to file for Chapter 7 bankruptcy and you may only be allowed to do so if you can demonstrate special circumstances.
In the gray area between $6,000 and $10,000, yet another calculation is often required. This one compares your disposable income over the next five years to a percentage of your unsecured debt to determine whether any significant repayment to your creditors is possible. If your disposable income over that five years is greater than 25 percent of your unsecured, non-priority debts, you’ll probably find yourself in the same circumstances as if you’d had more than $10,000 in disposable income. If your disposable income over a five year period is less than 25 percent of your unsecured, non-priority debts, you will likely “pass” the means test, and be able to file a Chapter 7.
You will find that the Means Test portion of the Median Income Test is quite complicated and is not simply a matter of plugging in numbers. There are legal decisions and legal conclusions that need to be made to determine the correct dollar amounts and the eligibility of certain expenses. Completing the Means Test is not something that someone unfamiliar with the bankruptcy code can do on your own. And, it is not something a non-attorney petition preparer can advise you on. Andrew does all of these calculations, to assure that you are in compliance with the bankruptcy code.
CALL OUR OFFICE TODAY AT 541-318-7112 TO MAKE AN APPOINTMENT FOR A 100% FREE CONSULTATION, AND ANDREW WILL DISCUSS ALL YOUR OPTIONS WITH YOU.