Boston Bankruptcy Lawyer

The Means Test

The means test was developed to limit the use of Chapter 7 bankruptcy to those people who truly are unable to repay their debts. The test does this by deducting specific monthly expenses from a person’s “current monthly income” to arrive at a person’s monthly “disposable income.” Current monthly income is an average of an individual’s earning over the six calendar months before filing for bankruptcy. The higher a person’s disposable income, the more likely the person won’t be allowed to use Chapter 7.

To take the means test, a person must first determine if his or her income is more or less than the median income of the state. The median is not the mean. The median is the point where 50% of the population’s earnings are higher than this point and 50% of the population earns less.

When a person earns more than the median, that person must determine if after deducting certain expenses, there is enough to repay debts.

If a person’s income is less than the median income for a family of the same size in the specific state, that person is free to file for Chapter 7. Nothing else has to be done concerning the means test.

If a person’s income exceeds the state median income for a family of a comparable size, the means test calculations get much more complicated. The person must determine if there is enough income left over after paying allowed monthly expenses to pay off at least a portion of the unsecured debts, like credit card bills. If disposable income is more than a certain amount, the person cannot file for Chapter 7 because the means test has been failed.

Contact a Boston Bankruptcy Lawyer

If you are facing a difficult financial situation and would like to know more about Chapter 7 bankruptcy and the means test, contact the Boston bankruptcy lawyer of Joshua Spirn & Associates at 1-800-975-5346.