What Is the “Means Test” in a Chapter 7 Bankruptcy?

If you are behind on your monthly bills and feel you are drowning in debt, filing for a Chapter 7 bankruptcy can give you a fresh start. Simply put, a Chapter 7 forgives most of your debts while allowing you to keep some of your property and to rebuild your creditworthiness.

As attractive as this remedy may sound, not everyone qualifies to have their debts discharged. Before you can file for a Chapter 7, you must pass the “means test,” which is designed to ensure that this form of bankruptcy is reserved only for those who truly need it. While high wage earners are generally excluded, people with good incomes may still qualify for Chapter 7 if they owe a lot of debt, including taxes.

The first step in the means test is to calculate your monthly household income and to compare it with the median household income in Georgia. As of 2019, the median income in Georgia is as follows:

• 1 person – $47,953
• 2 people – $63,303
• 3 people – $72,594
• 4 people – $82,476

If your monthly household income is greater than the median income, you must complete the next step of the means test, which is to determine disposable income. This involves deducting certain allowable expenses from your income, such as housing costs, utilities, child care expenses, taxes, insurance and church tithing. If the court determines that your remaining disposable income is enough that it could be used to pay your debts, you may be precluded from pursuing a Chapter 7. Note: Some people are exempt from the means test, such as members of the military who were called to active duty or performed homeland defense activity after September 11, 2001.

If you fail the means test, you may be able to proceed with a Chapter 13 bankruptcy, in which the court will reorganize your debts and approves a plan that gives you three to five years to pay off the debt. However, Chapter 13 eligibility is subject to secured and unsecured debt limits.

At Jeff Field & Associates, we have over 40 years of experience handling Georgia bankruptcy cases and are knowledgeable across all areas of bankruptcy law. We confidently help clients put their financial worries behind them as they a fresh start. Our main office is located in Scottdale and we also have offices in Gainesville, Marietta, Athens, Lawrenceville and Douglasville. Call 404-381-1278 or contact us online to schedule a free consultation with one of our dedicated bankruptcy lawyers today.