Do I Need to Pass the Means Test to File for Bankruptcy?
Are you currently considering a personal bankruptcy filing in Florida? If so, you might have started to read about bankruptcy options in order to understand your eligibility for filing different types of bankruptcy, and the benefits and limitations to each type of consumer bankruptcy. Generally speaking, individuals in the St. Petersburg area will typically apply for either Chapter 7 or Chapter 13 bankruptcy, depending on their specific needs and their individual financial circumstances. If you are planning to file for one of these types of bankruptcy, you have likely come across information about the “means test” and are likely wondering if this is a test you will need to pass in order to be eligible for bankruptcy protection.
Passing the means test is only a requirement for individuals (not businesses), and only to show eligibility to file for a liquidation bankruptcy. Our St. Petersburg bankruptcy lawyers can explain in more detail, and we are here to assist you with any means testing in order to begin planning for a Chapter 7 bankruptcy case.
Means Testing is Only Required for Individuals Filing for Chapter 7 Bankruptcy
First, we want to be clear that you will only need to consider passing the means test if you are planning to file for a consumer Chapter 7 bankruptcy. In other words, if you are planning to file for Chapter 13 bankruptcy (or any other type of reorganization bankruptcy), the means test is not required and you do not need to pass it.
The means test is intended to determine whether or not a debtor planning to file for Chapter 7 bankruptcy — a liquidation bankruptcy — actually has enough assets or income that they could repay more of the debt they owe than what they would have to pay in a Chapter 7 case. To put it another way, the means test is designed to determine whether a liquidation bankruptcy would be abusive. When a debtor cannot pass the means test because their income or assets are too high, they cannot file for liquidation bankruptcy but can still be eligible for reorganization bankruptcy under Chapter 13 or Chapter 11.
And, to be clear, you will only need to pass the means test in order to file for Chapter 7 bankruptcy if you have primarily consumer debt (as opposed to primarily business or corporate debt).
How to Pass the Means Test
What do you need to do in order to pass the means test? Depending on your financial circumstances, you might not actually need to fill out and complete all means testing forms. If your income is below the Florida median, you are eligible for Chapter 7 bankruptcy and do not need to formally complete the means test.
If your income is at or above the Florida median, then you will need to fill out means testing forms (all subforms of Form 122). By filling out these forms, you will determine your household size and the amount of your disposable income (your income minus expenses). The amount of your disposable income will determine whether or not you pass the means test. If your disposable income is low enough, you will pass. If you do not pass, however, you can still consider Chapter 13 bankruptcy or another form of reorganization bankruptcy.
Contact a St. Petersburg Bankruptcy Attorney for Assistance
If you are considering an individual bankruptcy filing in Florida, the best way to determine your eligibility — and any requirements you must meet in order to file — is to seek advice from one of the experienced St. Petersburg bankruptcy attorneys at the Law Offices of Stephen Barszcz. We can talk with you today to learn more about your financial circumstances, and if you are planning to file for Chapter 7 bankruptcy, we can tell you more about means testing and help you to understand if you qualify. Contact us today for assistance with your bankruptcy case.
Sources:
justice.gov/ust/means-testing
law.cornell.edu/uscode/text/11
