Chapter 7 and 13 bankruptcy: Means test

SOME debtors contemplating filing bankruptcy have expressed their personal preference of filing Chapter 7 bankruptcy, instead of Chapter 13, for various reasons such as a shorter time frame to get a discharge under a Chapter 7 bankruptcy filing. While a majority of bankruptcy filings may qualify for Chapter 7 Bankruptcy, some might not. One needs to pass the means test to be eligible for Chapter 7 bankruptcy filing.

The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), enacted in October 2005, introduced the concept of the “means test” which is meant to determine whether debtor filers are eligible to file a Chapter 7 liquidation bankruptcy or whether hey should instead file a Chapter 13 ankruptcy plan. ebtors whose debts are not rimarily consumer debts or who is a disabled eteran and ncurred debt rimarily during ctive duty or performing a homeland defense activity are exempt from the means test.

The first part of the means test is to determine the debtor’s urrent average monthly income for the last six (6) months prior to filing bankruptcy. [The current average monthly income refers to all taxable and non-taxable income from all sources, unless otherwise exempted, including those of the non-filing spouse (if married)]. If the debtor’s monthly income is less than the applicable median income based on the family size for his state, he can file a Chapter 7 bankruptcy. If his monthly income is more, he has to pass the second part of the means test. For instance, in CA, the current state median income for a three (3) person household is $ 75,160 per year.  If you belong to a family of three (3) and your combined yearly income does not exceed $75,160, you are eligible to file Chapter 7. You do not have to finish the rest of the means test.

On the other hand, if your monthly income exceeds this amount, you have to finish the means test (Form 122A-2) and the computations can be complex and confusing. In the second part of the means test, you need to determine if you have enough disposable income after deducting the allowable monthly expenses (based on IRS guidelines) to pay in full or in part the unsecured debts (such as credit card debts or medical bills). Allowable monthly expenses may include basic living expenses such as food, clothing and shelter, transportation, telecommunication expenses, child care, future payments for secured debts and others. You are not qualified to file Chapter 7 bankruptcy if your disposable income adds up to more than a certain amount. If so, you have to file Chapter 13 bankruptcy.

If a Chapter 7 petition is filed and later there is a determination that the debtor filer is not qualified, the court can either dismiss the petition or convert it into a Chapter 13 petition, upon finding that the relief sought under Chapter 7 would be “abuse” under the ppropriate provisions of the bankruptcy law.

If you are contemplating of filing bankruptcy or other alternatives, it is advisable to seek the counsel of a bankruptcy lawyer o uide you on the intricacies of filing for such a petition.


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Atty. Gwendolyn Malaya-Santos is a member of the State Bar of California and the Integrated Bar of the Philippines. To schedule for a free initial in-person consultation, please call Tel. Nos. (213) 284-5984 or (626) 329-8215. Atty. Santos’ office is located at 3450 Wilshire Blvd., Suite 1200, Los Angeles, CA 90010. 

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Information contained in this article does not, nor is it intended to, constitutes legal advice for any specific situation and does not create a lawyer-client relationship. It likewise does not constitute a guarantee, warranty, or prediction regarding the outcome of your legal matter. 

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