Qualifying for the Means Test
The means test was a new requirement that had passed with the 2005 BAPCPA (Bankruptcy Abuse Prevention and Consumer Protection Act) . To be able to qualify to file a chapter 7 bankruptcy, a debtor must pass the means test or the test must not be applicable to them. Otherwise they must file a chapter 13. Usually it is better to file a chapter 7 because under chapter 7, a debtor is not required to pay back to the unsecured creditors and the entire bankruptcy is completed within 4 months.
The means test is a two portion test to see whether a presumption of abuse arises given your income and expenses. The purpose of the test, when it was developed, was to determine if a consumer had abused the use of credit, mostly with credit card. However, now it has become a rule that the trustee uses to determine if you should not file a chapter 7 and instead require you file under chapter 13 or dismiss you bankruptcy. Chapter 13 is more burdensome and requires you to make payments of your disposable income for the next 5 years. Therefore an experienced bankruptcy attorney will know how to qualify you for a chapter 7 if possible.
The first part of the test is to compare your gross income, compared to the income of a similar household size as yourself. If your gross income is below the median income, then you qualify. For example, if the household income was under $47,683 for a single individual in California living on his own, then he would qualify to file chapter 7, each state is different. You can find the data used in a means test at the trustee site.
If a debtor is unable to qualify under the first part, then he may be able to qualify under the second portion of the means test. Under the second portion, we take all the qualified expenses and monthly contractual obligations into consideration. An experienced bankruptcy attorney with knowledge in the local practices of the trustee is invaluable in qualifying the otherwise difficult cases. If you you have been told by other attorneys that you do not qualify to file a chapter 7, I encourage you to contact me, your local Los Angeles bankruptcy attorney who practices in bankruptcy only. We know every deduction and expense available to make you qualify. And in certain circumstances, delaying the bankruptcy or better planing for it may result in qualifying you in 3-4 months down the road if we are unable to qualify you now.
Finally, in certain circumstances, the means test is not applicable to you. Mainly if the majority of the debt is non-consumer debt. Again, the courts have different interpretation of what they consider to be consumer debt and the trustee has different interpretation of consumer debt. The right bankruptcy attorney can guide you through these pitfalls and get you a chapter 7 discharge whenever possible.