Can you pass the bankruptcy means test even if you think you make too much money?
The means test is the “gatekeeper” of the bankruptcy process. It determines whether you qualify for a Chapter 7 debt discharge or if you must file a Chapter 13 repayment plan. In this training, Minnesota bankruptcy attorney Jeff Bursell breaks down the 6-month lookback math, the three types of allowed IRS deductions, and the specific strategies used to help families qualify for Chapter 7—even when they are $35,000 over the median income.
FAQs FOR CONSUMERS
Q: How do I pass the bankruptcy means test if I am over the median income?
A: Passing the means test isn’t just about what you earn; it’s about your “disposable income” after allowed deductions. Even if you are tens of thousands of dollars over the median, you may pass by deducting IRS-allowed expenses for food, clothing, mortgage payments, taxes, and even certain secured debts like car or boat payments.
Q: What income is included in the bankruptcy means test lookback?
A: The means test looks at all gross income earned in the 6 months prior to filing. This includes wages, business income, and interest. However, Social Security and certain VA benefits are generally excluded from this calculation.
Q: Can the timing of my bankruptcy filing change my eligibility?
A: Yes. Eligibility can change literally overnight. Because the test looks at a rolling 6-month window, filing on the last day of a month versus the first day of the next month can be the difference between qualifying for a Chapter 7 discharge or being forced into a 5-year repayment plan.
Q: Does having a baby or more dependents help me pass the means test?
A: Yes. Your state’s median income threshold increases with your household size. A larger family size allows for higher income limits and higher IRS-standardized deductions for living expenses, which can help a household pass the means test when they otherwise wouldn’t.
NEXT STEPS FOR YOUR FINANCIAL FUTURE
Don’t Guess With Your Financial Future The means test is complicated, and the timing of your filing is critical. If you have questions about your specific situation, we can connect you with an expert attorney in your state.
