The Bankruptcy Means Tests is one of the most complicated aspects to bankruptcy law. This “test” was born of the 2005 changes to federal bankruptcy law implemented by congress in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). Effectively, individuals with primarily consumer debts have to prove that they are not abusing the bankruptcy laws.
To be certain, the means test makes qualifying for Chapter 7 bankruptcy more difficult; however, an experienced bankruptcy attorney can help you navigate the means test and qualify for the debt relief that you deserve.
The Bankruptcy Means Test Explained
The means test is a review of your income minus expenses. It determines whether or not you qualify for bankruptcy relief under Chapter 7.
If your net income falls below the state median for your household size, then you automatically qualify for Chapter 7 bankruptcy. Because there is no “presumption of abuse,” below-median debtors do not have to run the means test.
If your net income is above the state median for your household size, then you must run the means test to determine whether or not you qualify for Chapter 7 bankruptcy. An above-median debtor must overcome the presumption of abuse and demonstrate that the qualify for Chapter 7 bankruptcy. Understand that having a high income does not preclude you from relief under Chapter 7.
With the help of the experienced attorneys at The Law Offices of Barbara B. Braziel, even people who earn well above the median income for our state can qualify for Chapter 7 bankruptcy. Contact us for a free consultation and analysis of your income.
Median Income In Georgia
As of November 1, 2016, the median household income in Georgia is:
- Household of One: $42,735
- Household of Two: $55,600
- Household of Three: $61,705
- Household of Four: $72,290
- Households of more than four: add $8,400 for each individual in excess of four.
If you live in Georgia and your gross household income falls below these figures, then you qualify for Chapter 7 bankruptcy relief without further means test analysis. If you live in Georgia and your gross household income is above these figures, then you must run the means test to determine if you qualify for Chapter 7 bankruptcy relief.
Calculating Median Income
The U.S. Bankruptcy Code defines how to calculate income for purposes of bankruptcy. It operates off of the presumption that your ability to pay back your debts in the future should be determined by your average income over the past 6-months. This calculation using a 6-month look back period does not account for your present circumstances, including recent decreases in your income.
Income for the purposes of the means test is calculated by taking your average income for the past 6-months. The calculation must include all income that you receive. However, the following benefits are excluded from the means test calculation of income: social security benefits, payments to victims of war crimes or crimes against humanity, and payments to victims of international terrorism or domestic terrorism.
Calculating the Means Test
The means test calculation considers your income minus allowable expenses. Essentially looking at your ability to fund a Chapter 13 re-payment plan.
The allowable expenses in the means test are calculated based on a mix of your actual expenses and standard pre-determined expenses. You can explore the official means test form here. An experienced bankruptcy attorney can help you navigate through the means test.
We are here to help you determine if you qualify for bankruptcy, and if so, what bankruptcy chapter will best serve your needs. We offer free consultations to anyone in Savannah, GA and all of the surrounding areas.
We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.