Qualifying for Chapter 7 bankruptcy is not a given, and those who file a petition must go through the process to determine whether they meet certain eligibility requirements. One of the primary requirements a debtor must submit to is the so-called means test, which determines whether a debtor’s filing is appropriate.
The test, as is pointed out in a recent article, has two parts. Actually, there are four parts to the test, and five if you include the signature. We’ll take a brief look at them, breaking the means test down in upcoming posts.
The first part of the means test is for determining the debtor’s adjusted income. This is calculated by subtracting from the debtor’s total current monthly income any part of his or her spouse’s income not used to pay for household expenses. In the second part, the debtor makes deductions from his or her income based on national and local standards for certain expenses.
These deductions in the second part include: dependants; food, clothing and other items; out-of-pocket health care allowances; mortgage or rent expenses; housing insurance and operating expenses; transportation costs; vehicle operation expenses; vehicle ownership or lease expenses; taxes; certain education costs; childcare; and certain other expenses, including payments on debts secured by an interest in property owned by the debtor, including home mortgages and vehicle loans.
The second part of test also involves determination of whether the debtor is eligible for a Chapter 13 filing and what the projected monthly plan payment would be in such a filing.
In upcoming posts, we’ll look at the other parts of the means test, and why it is important to work with an experienced attorney when navigating the test.
Source: United States Courts, “Chapter 7 Means Test Calculation,” April 1, 2016.