Unlike other forms of bankruptcy, there are strict income limits on who can file under Chapter 7. If your monthly income is too high, or if you have enough discretionary income after expenses to pay off a decent amount of your debts, the court will generally consider them ineligible to file under Chapter 7 of the Bankruptcy Code.
To find out if you are eligible for this process, you can take the Jacksonville Chapter 7 bankruptcy means test. Give us a call, and a knowledgeable bankruptcy attorney could help you understand how this test works and what it means for your filing prospects.
Who Has to Complete the Chapter 7 Means Test?
Not everyone who wants to file for Chapter 7 is required to complete the means test. For example, if most of your financial obligations are non-consumer debts, you do not have to take the test. Additionally, if you acquired your debts while performing active military service and are now a disabled veteran, the mean test is not required.
If you do not fall into one of those categories, you should look into what parts of the test you have to complete. Many people only have to go through the first stage of the means test, which is a calculation of average household income over the six months before the desired filing date.
If your monthly income is below the median level for a household of your size in Florida, you might immediately qualify. A Chapter 7 bankruptcy attorney could clarify what median incomes are applicable as you complete the means test.
Calculating Your Monthly Net Income in Jacksonville
If your monthly income is above the median for similar households in your area, you may need to complete the second part of the means test to file for Chapter 7 bankruptcy. In the second stage of this process, you must show that your monthly expenses leave you with so little disposable income that they could not pay off your debts with a reasonable payment plan.
Under federal bankruptcy law, allowable expenses include legal obligations like tax debts and personal expenses necessary to maintain a basic standard of living, such as food and housing costs. Monthly income is not limited just to work wages, it can also include:
- Rental income
- Pension and retirement income
- Unemployment check
- Certain other sources of compensation
After subtracting all allowed expenses from your income, you will find your “disposable monthly income” or DMI.
Determining Your Eligibility
If your DMI multiplied by 60 months is $7,475 or under, you are automatically eligible for Chapter 7 bankruptcy. Conversely, if your 60-month DMI is more than $12,475, you are ineligible to file under Chapter 7, though you could still file for Chapter 13 bankruptcy. If your 60-month DMI is between these two numbers but is LESS than 25% of your total nonpriority unsecured debt (e.g. credit cards, general loans and medical bills), you are eligible to file a Chapter 7 bankruptcy.
It’s easy to miscalculate your eligibility. You should seek help from an experienced lawyer after completing this stage of the means test, especially if your income falls between these two figures. Additional calculations may be needed before you can file.
Ask an Attorney About the Jacksonville Chapter 7 Bankruptcy Means Test
If you do not automatically qualify for Chapter 7 after completing the means test, that does not mean you may still be able to file under another chapter of the Bankruptcy Code. Likewise, just because you qualify to pursue Chapter 7 bankruptcy does not necessarily mean it is the best option for you. If you need help determining your eligibility or determining what chapter is best for you, reach out to our office today.