Chapter 7 | The Means Test

To determine if you can file for Chapter 7, the first step of the means test is to determine your current monthly income (CMI). CMI is the average monthly income you received during the previous six-month period. To calculate CMI, you must include your income from nearly all sources. However, there are limited exceptions to the rule that all income must be reported.

Once you have calculated your CMI, you compare your income to the median income in your state and county for a household of your size. If your CMI is less than the median, you pass the means test and qualify for Chapter 7 bankruptcy. If your income is greater than your state’s median, you are not automatically disqualified from Chapter 7. Rather, you must determine your disposable income by subtracting allowable expenses from your CMI. If your disposable income is greater than a certain amount for your area, you are ineligible for Chapter 7.

If you do not pass the means test, you may be limited to Chapter 13 bankruptcy or alternative debt relief solutions. Under Chapter 13, you pay back all or a portion of the debt through a payment plan but can also take advantage of features exclusive to this chapter, including mortgage redemption and cram down. A Greensboro bankruptcy attorney can aid your understanding of the benefits each type of bankruptcy can bring to individuals and small businesses.

Contact us to get a clearer understanding of the means test

I understand that the means test can be a particularly confusing topic for many. At Blalock Law Offices, P.A., I counsel all clients one-on-one to give the personal attention you deserve. Please contact us at (336) 274-2343 or online today.