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Any time a person files for bankruptcy, federal courts will apply a means test to see if the debtor qualifies for Chapter 7 bankruptcy. The first step in that test is to compare the person's average monthly income for the six months preceding the filing to their state's median family income. If your monthly income exceeds the state median, you may not qualify for Chapter 7.
And any time there is math involved, a calculator is sure to follow. Here are the numbers that you need to punch into a Chapter 7 means test calculator, and where to find them.
In order to see how your monthly income compares to the state median, you'll first need to add up any money coming in each month. Income from any of these sources should be included in your calculations:
Tax refunds and Social Security payments for retirement or disability are not included in the monthly income calculation.
In order to find your state's median monthly income, you can visit the U.S. Trustee Program's means testing page. Just enter the most recent time period in the box labeled "Data Required for Completing the 122A Forms and the 122C Forms," and you will find links to state median income figures.
The U.S. Courts website provides a Means Test Calculation form and instructions on how to fill out the form. If you make more than your state's median income, you'll need to meet the second part of the means test to qualify for Chapter 7. The second part requires demonstrating that, after deducting all allowed expenses (actual and standardized expenses), you don't have the disposable income to pay some portion of what would be called "unsecured debt" under a Chapter 13 repayment plan.
If you fail the means test, you may still be able to file for Chapter 7 if you can demonstrate some "special circumstances" -- like recent unemployment, unusually high rent, or a serious medical condition -- that inhibit your ability to repay the debts.
Figuring out if you qualify for bankruptcy, and for which type, can be a complex calculation. For help, contact an experienced bankruptcy attorney.
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.