The bankruptcy means test is used to determine eligibility for a Chapter 7 bankruptcy. It is one of the major hurdles to overcome if you want to be eligible for a Chapter 7 filing. Those that cannot pass the means test or otherwise become eligible for Chapter 7 may be able to use a Chapter 13 repayment plan instead.
Georgia’s Median Income for the Means Test
If you make less than your state median income, you do not need to worry about the means test, and you are generally eligible for a Chapter 7 bankruptcy. Median income numbers are update frequently. These are the Georgia median income levels effective April 1, 2017, but you should ask your bankruptcy attorney if the numbers have been updated.
- $43,274 for a one-person household
- $56,301 for a two-person household
- $62,483 for a three-person household
- $73,202 for a four-person household
Each additional member of a household increased the median income amount by $8,400.
To determine your current income, you will have to report your income for the past six months. This will be used to calculate your current monthly income, which will then be adjusted into an annual figure and compared to the Georgia median income.
If you have had steady income for the past six months, it will be fairly simple to figure out your current monthly income. However, if you have had recent changes in your income or receive commission payments or other irregular compensation, it will be a bit more complicated.
What to Do If You Fail the Means Test
If your income is over the state median, you have to take the means test, which requires you to subtract statutorily allowed expenses from your income. This calculation attempts to determine how much disposal income you have to pay your creditors in a Chapter 13 repayment plan.
Because Chapter 13 plans last up to five years, you will multiply your currently monthly income by 60 to determine your potential income over the next five years. You will then subtract the allowed expenses for this time period. If the result is over $12,850, you fail the means test. If the amount is below $7,700, you pass the means test. Disposal income between those amounts will require further calculations to determine if you pass the means test.
Failing the means test raises a presumption of abuse, but that presumption can be overcome if you have special circumstances justifying higher expenses. You may also decide that a Chapter 13 bankruptcy is a better option for you.
If you expect a reduction in income that could put you below the state median income, you may be able to become eligible for Chapter 7 by waiting a few months to file. Consult with a bankruptcy attorney to discuss your eligibility and options if you are unable to pass the means test.
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