Chapter 7 and 13 bankruptcy: means test

DURING initial consultations, some debtors contemplating filing bankruptcy have expressed their personal preference of filing Chapter 7, 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, 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 they should file a Chapter 13 bankruptcy plan. 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 relief sought under Chapter 7 would be “abuse” under the appropriate provisions of the bankruptcy law.

Based on amendment to the bankruptcy forms effective 12/2014, individual debtors are required to

The means test has actually two (2) parts or phases. The first part of the means test is to determine the debtor’s current 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, he can file a Chapter 7 bankruptcy. If his monthly income is more, he has to pass the second phase of the means test. Otherwise, he will have to file Chapter 13.  For instance, in CA, the current state median income for a three (3) person household is $66,618.00 per year.  Stated otherwise, if you are a family of three (3) and your combined yearly income does not exceed $66618, 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 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.

If you are contemplating of filing bankruptcy or other alternatives, it is advisable to seek the counsel of a bankruptcy lawyer to guide 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 1200-105, 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. 

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code. 

  1. Thank you for this blog! Before filing for bankruptcy it is always neccesary for tests are done on what kind chapter is applicable for a business and individuals. In Australia, if you are looking at going bankrupt there is one critical principle you must be aware of, and that is that the quicker you act the more alternatives you will have. I recently had some problems with it and ended up getting some help with this matter from

  2. Very informative blog! A bankruptcy means test is very necessary to know the right bankruptcy to file for a certain individual and of course it depends on the level of the debt amount and the paying capacity of the person. Making the big decision to go bankrupt can be a little less painful if you sit down and add up all the debt you have and then work out how long it is going to take you to pay it all off, and if the answer is longer than 3 years then bankruptcy might be right for you. I had no idea what to do with this until I talked to the financial experts from

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