Do I qualify for Chapter 7 Bankruptcy?

Los Angeles Chapter 7 Bankruptcy AttorneysChapter 7 bankruptcy is meant for people who are in an especially tough spot financially. To qualify for Chapter 7 bankruptcy, your disposable income must be low enough to pass the means test.

Chapter 7 Bankruptcy “Means Test”

The “means test” was specifically designed to keep bankruptcy filers with higher incomes from filing for Chapter 7 bankruptcy. The means test measures your average monthly income for the six-month period before your bankruptcy, against the median income of a similar household in your state.

If you find your income is below the median, you may qualify to file Chapter 7 bankruptcy in Los Angeles, and all of California!

Even if your income is above the median, you may still qualify depending on your individual financial circumstances.  In some circumstances, the means test may not apply to you such as if the majority of your debts are for business purposes and are not considered to be consumer debts.

Californian Median Incomes & Thresholds:

Median incomes vary from state to state, so the median threshold you are compared against in California will be different from the median threshold you are compared against in Ohio. If you make more than the median amount for your state, you’re are not automatically disqualified from filing for Chapter 7. Your next step would be to complete the entire means test form.  The means test form helps to determine whether you have enough disposable income left, after paying monthly expenses, to continue paying off some of your unsecured debts.

Household Size Threshold If your income is below this figure If your income is above this figure
1 $47,798.00 You may qualify to file Chapter 7 bankruptcy You may still qualify for Chapter 7 bankruptcy. But you may not qualify, and might have to examine other options such as Chapter 13 bankruptcy
2 $62,009.00
3 $66,618.00
4 $75,111.00
5 $83,211.00
6 $91,311.00
7 $99,411.00
8 $107,511.00
9 $115,611.00
10 $123,711.00

How do I calculate the Means Test to qualify for Chapter 7 bankruptcy?

When calculating your monthly income, you must remember the means test goes back 6 months BEFORE you file for bankruptcy. So if you have been unemployed for two months, your income for the remaining four still counts against the test.

To calculate your gross monthly income, add up ALL income from the past six months. What do we mean by all income?  Your qualifying income includes wages earned, unemployment received, spousal support, social security, etc. After you add all the income up, you must take the total and divide by six, in order to get the amount for the past six months.

Filing bankruptcy can be a very complicated process, and is not the right course of action for everybody. Take a FREE 5-minute evaluation to find out from a Chapter 7 bankruptcy attorney, if you can qualify for bankruptcy.