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Understanding the Chapter 7 means test

On Behalf of | Jan 17, 2020 | Bankruptcy

Your struggles with debt are not unique, many in Houston have faced such issues. Indeed, several of the clients that our team here at Christopher Todd Morrison, P.C. have worked with in the past have discovered that personal bankruptcy is often the only reasonable solution available to them to get out from under their debts and re-establish themselves on firm financial ground. Chapter 7 bankruptcy is the most popular option due to the benefit that it provides of allowing you to have certain eligible debts discharged. Yet if you want to pursue this option, you must first qualify. 

It has been detailed on this blog in the past that part of the qualification criteria for a Chapter 7 bankruptcy (commonly known as the “means test”) is that your income be below that of the median for your particular demographic in the state. Yet if it is not, that does not necessarily mean that filing under Chapter 7 is not an option for you. According to the website for the U.S. Federal Judiciary, you may still qualify after a review of your income in comparison to your debts. 

Specifically, your net monthly income (minus certain allowed expenses) is reviewed over a period of five years. As long as it is less than either 25% of your non-priority unsecured debt (provided that amount is at least $7,700), or $12,850 in total, you can still qualify for Chapter 7. If it is not, then your case will likely be converted over to a Chapter 13. 

You can learn more about the regulations governing personal bankruptcy protection by continuing to explore our site.