Bankruptcy Means Test – What You Should Know

You may have to consider filing bankruptcy if your days include financial stress and avoiding debt collectors' calls. Chapter 7 is often the best way to start financially again for those with huge debts and low income. To qualify, however, you must pass the means test in Chapter 7.


Chapter 7 Bankruptcy Means Test

Since Chapter 7 releases your debts and creditors get little to nothing, a means test needs to be taken to determine whether you qualify. This test is intended to prevent higher-income individuals from qualifying so to pay a specific part of their liabilities by a Chapter 13 plan instead.

A Chapter 7 means test determines whether your income is below the given income as yourself or for your family. Your bankruptcy lawyer in OKC will collect information, ask family-related questions and decide whether you have any exemptions from the means test. The calculation is usually straightforward, but in some cases, the process can be complicated and involve several steps.

For filed cases after April 1, 2019, here is the applicable Oklahoma median income:

  • One-Member Household – $46,756

  • Two-Member Household – $53,133

  • Three-Member Household – $63,417

  • Four-Member Household – $74,341*

*Add $9,000 for each household member after four.

If your take-home is less than that amount, you can automatically file in Chapter 7 and do not have to continue the means test. If your income is above that threshold, your average monthly household income for the 6th months before bankruptcy is calculated.


When You Pass the Bankruptcy Test

Passing the means test gives you the green light for bankruptcy chapter 7, which forgives most of your unsecured debts such as medical bills and credit card debt. This doesn't mean, however, that's your best route.

Perhaps you would instead file for the bankruptcy of Chapter 13. You can catch up in debts such as a mortgage, overdue credit bills and taxes – and hold on to your assets with this type of bankruptcy.

Failing the Bankruptcy Test

If you fail the means test, you do not have an appeal process, but Chapter 13 is the only way you can keep filing for some time.

Note that your revenue and expenses for the last six months reflect your financial condition. After six months you can take the test again if you think your situation will then meet the debt forgiveness threshold of Chapter 7. To understand it better, you can try contacting our bankruptcy lawyer in OKC.

Chris Mudd and Associates help people through this means test. For queries, contact a bankruptcy lawyer in OKC. 

** Disclaimer: This blog post does not constitute legal advice, nor does it create a client-attorney relationship.