19:23 23 March in Bankruptcy



What is the Means Test, and what does it mean to you?  Many people have heard about it, but in our experience, not many actually understand what it is.

An Explanation Of The Means Test

The Means Test is the method required by the U.S. Bankruptcy Code for determining whether you, the filer, meet the minimum requirements for bankruptcy.  This screening process was designed to analyze whether or not you will be able to make payments, and whether you should be in a Chapter 7 or a Chapter 13.

Summary of the Means Test Standards

The first step of the Means Test is to compare your household income to the median income in Florida for a family of the same size as yours.  The current annual adjusted income data for Florida is:

  • $40,029 for a single person household
  • $50,130 for a two person household
  • $54,594 for a three person household
  • $65,135 for a household of four or more

You should take note that these numbers are for the entire household, not just for the person filing.  That means that if you are married and only you or your spouse file for bankruptcy the court will still look at both of your incomes to determine your eligibility.  These numbers are also for gross income, meaning that they are measured before any taxes are deducted.

The second step of the process involves deducting certain expenses from your gross income.  This will give you your disposable income.  If your projected disposable income for the next 5 years is less than $100.00 a month (equaling $6,000.00 total), then you are likely eligible to file for a Chapter 7 bankruptcy.  If you have more than $10,000.00 in projected disposable income, then you will likely not qualify for a Chapter 7.

Like we already mentioned, the Internal Revenue Service (IRS) allows you to deduct several kinds of expenses, and this can reduce your disposable income, increasing the likelihood that you will pass the test.  The full list is quiet extensive, but here are some of the more common deductions:

  • Car payments
  • Court ordered alimony and child support
  • Certain health care and dental costs

An experienced bankruptcy attorney is essential in determining what you can deduct and whether or not you will qualify.  If you are considering a bankruptcy, we highly recommend speaking with qualified counsel.  Please feel free to contact our offices for more information, and we would be happy to schedule you a free consultation with a bankruptcy attorney.