Bankruptcy Means Test



What is a Means Test?

The chapter 7 bankruptcy means test is a formula designed to determine who is eligible for filing Chapter 7 bankruptcy in all fifty states. It is the way the local bankruptcy courts keep individuals with high incomes from filing for Chapter 7 bankruptcy protection. Although it could it could allow individuals with a income that have high expenses (such as a high mortgage payment) to qualify for Chapter 7 bankruptcy, which will discharge payments of specific debts that the individual has incurred. The means test deducts monthly expenses from your current monthly income and calculates your monthly disposable income.

Each state has a different dollar amount as a threshold for qualifying under the means test. In the State of Alabama:
• If you are single, live alone, and earn less than $39,768 per year – you automatically qualify under the means test to file for Chapter 7 bankruptcy protection.
• If you have one other dependent living with you, with no income of their own, and you make less than $48,770 per year – you automatically qualify to file for Chapter 7 bankruptcy protection.

If you qualify based on the means test for Chapter 7 bankruptcy protection, you could have the majority of your debts wiped out. Your creditors would not be able to collect from you.

Alabama Means Test Calculator

In order to determine whether your income is below Alabama’s median income level, you will need to calculate your family’s gross income within the last six months. If you fall below the average, there is a presumption that you pass the bankruptcy Means Test in Alabama and are eligible to file a Chapter 7 bankruptcy. If your income is higher than the limit, then you will need to complete the next portion of the Means Test. To help you with your calculations, you can use an Alabama Means Test Calculator. It is important to note that figures for the Means Test are updated frequently and as a result, some means test calculators may be incorrect. Make sure your Alabama Means Test Calculator is up-to-date.ow

How Can Individuals With High Expenses Still Qualify for Chapter 7?

Addressing how individuals with high expenses can still qualify for Chapter 7 bankruptcy in Alabama, the means test deducts monthly expenses from your current monthly income and calculates your monthly disposable income. This process could potentially enable individuals with some income and significant expenses, such as a high mortgage payment, to meet the requirements for Chapter 7 bankruptcy. By discharging payments of specific debts incurred by the individual, Chapter 7 bankruptcy offers a route for those facing financial challenges to find relief and a fresh start.

What Happens If I Fail The Means Test for Alabama?

If you fail the Chapter 7 bankruptcy Means Test in Alabama, You probably need to talk to an attorney. We can review your expenses on the second part of the Means Test to make sure you did not forget anything. Many people miss common deductions on the Means Test like taxes, involuntary deductions, disability, term life insurance, mortgage payments, car payments, other secured debt payments, court-ordered payments, child care, health care, and charitable contributions. Further, if you still fail after reviewing your deductions, but you expect your income to decrease in the next few months, then you may be able to wait a few months to see if you can pass the Means Test, and then file a Chapter 7. If you have questions regarding a Chapter 7 bankruptcy and the means test, you should contact an experienced Huntsville or Decatur, Alabama bankruptcy attorney. We offer free consultations to all bankruptcy clients. Call 256-534-3435 or 256-350-7200. We are here to help.

Huntsville Office Location:
303 Williams Avenue SW
Suite 321
Huntsville, AL 35801

Decatur Office Location:
211 Oak Street NE
Decatur, AL 35601