Pass the Chapter 7 Means Test

: Reese Baker & Associates

  Filed under: Chapter 7

In order to file for Chapter 7 bankruptcy, you need to be able to pass the bankruptcy “means test” which takes into account your expenses and income. If your income is too high according to state and/or federal bankruptcy code, you will not pass the means test and either have to wait until your financial situation changes or file for a Chapter 13 repayment bankruptcy instead. Even though having a high income will typically mean that you cannot file Chapter 7 bankruptcy, there are some expenses that you can deduct to offset your income and help you pass the Chapter 7 means test.

The reason that so many individuals feel that a Chapter 7 bankruptcy is best for them is that in a Chapter 7 bankruptcy there is no repayment, versus a Chapter 13 bankruptcy which requires you to pay back your debts over a 3-5 year period. While Chapter 13 bankruptcy does have its unique advantages, if you’ve consulted your bankruptcy attorney and Chapter 7 bankruptcy is the best for your financial situation, there are some expenses that can help you pass the Chapter 7 means test.

Tax obligations, for example, can be used to offset high income in an effort to pass the means test. Additionally, any involuntary deductions such as retirement plans, uniforms, and union dues are expenses that can help do the same. You can also subtract money you spend on health, disability, or term life insurance on the means test. If you are looking for further expenses that can be deducted from your income on the Chapter 7 means test, the following can also be used for that purpose:

  • Money to Charities
  • Child Care Expenses
  • Child Support
  • Alimony
  • Secured Debt Payments

If you have other kinds of expenses not listed here that you are curious as to their effect on the Chapter 7 means test, you should bring the information to your Houston bankruptcy attorney and ask if you can deduct their costs in an effort to help you pass the test and have your debts discharged in a Chapter 7 bankruptcy.