If you are overwhelmed by debt and are considering filing for Chapter 7 bankruptcy, you must first pass a state means test. This is a federal requirement that determines your eligibility. The test is primarily for individuals with consumer debts who wish to liquidate their assets. To qualify for debt discharge, the test assesses whether your income falls below the threshold. If you do not meet the income threshold requirements, you may have to file for Chapter 13 bankruptcy instead.
The most effective way to accurately assess your income is to contact an experienced attorney to assist you with the Fort Worth Chapter 7 bankruptcy means test. Our Chapter 7 bankruptcy attorneys can help you navigate the complex calculations involved to maximize your chances of meeting the eligibility criteria.
The Means Test
The means test is a two-step process that involves comparing your income to the state’s median income and, if necessary, calculating your disposable income.
Income Comparison
The first step of the Chapter 7 means test from the Official Form 122A–1 involves comparing your current monthly income (CMI) with the median income for the state. Your CMI is your average gross income from all sources for the six months preceding the date of filing, but it excludes any income from Social Security benefits or Veterans Affairs disability compensation. Once you have calculated your CMI, multiply that figure by 12 for an estimate of your annual income.
Then, compare your annual income, together with the size of your household, to the state median income. If your annual income falls below the state median, then you have passed the first part of the means test and can move on to the second step.
Disposable Income Calculation
The second step involves calculating your household’s disposable income. Official Form 122A–2 requires you to subtract your allowed expenses from your CMI to determine your monthly disposable income. Allowable expenses include:
- Food
- Taxes
- Housing
- Insurance
- Childcare
- Transportation
- Secured debt, such as mortgages and car loans
This figure highlights your genuine ability to pay debts after living expenses.
Presumption of Abuse
The last step of the earnings assessment to qualify for Chapter 7 bankruptcy in Fort Worth is determining whether there is a presumption of abuse, which involves multiplying your monthly disposable income by 60 to create a five-year projection.
There is no presumption of abuse if your 60-month total is less than $9,075. When the total is between $9,075 and $15,150, you can compare the figure to 25 percent of your non-priority unsecured debts, such as credit cards. There is no presumption of abuse if that amount is less than 25 percent.
How Much Is Too Much?
Typically, to qualify under the means test, your income must be below the following:
- A single person must earn less than $5,287 monthly, or $63,448 annually
- Couples must have a combined income of less than $6,920 monthly, or $83,037 annually
- A three-person household must have a combined income of less than $7,949 monthly, or $95,391 annually
- A four-person household must have a combined income of less than $9,227 monthly, or $128,272 annually
You may also qualify for special exemptions if you fall within specific groups. These figures are adjusted several times a year and may change. For the latest numbers, please visit: https://www.justice.gov/ust/means-testing.
Special Exemptions
If you fail to meet the income requirements of Chapter 7 bankruptcy, you may still qualify under special exemptions in Fort Worth. Some examples of special exemptions include if you are a disabled veteran or if your debts are mostly business-related. If you do not qualify under any special exemptions, you may need to consider filing for Chapter 13 bankruptcy.
The timing of your filing could also affect your eligibility, as the six-month period used for calculating your average income may or may not include high-income months. A knowledgeable attorney could guide you through the process and help you optimize your calculations.
Call Us for Help With the Means Test When Filing for Chapter 7 Bankruptcy in Fort Worth
If you are in debt and are considering filing for bankruptcy, you must meet federal requirements by taking the Fort Worth Chapter 7 bankruptcy means test. If, after completing the two-step process, your income is above the state median threshold, you may have to file for Chapter 13 bankruptcy instead.
Our qualified legal professionals could provide the guidance you need when calculating your income to improve your chances of passing the means test. Call our firm today to schedule a consultation.
