Getting a Chapter 7 Bankruptcy discharge can feel daunting and complex. There are strict requirements to fulfill before you’re issued this discharge. One of the things that can help you is by taking a bankruptcy means test calculator in your state that is based on the income limits.
The Chapter 7 bankruptcy means test is split into two parts.
- The first section uses IRS figures to know if you may qualify for a Chapter 7 discharge.
- The second section of the means test uses your real expense.
A Chapter 7 Means Test Calculator uses the same protocol with the official US Bankruptcy. In our Chapter 7 means test calculator, we’re going to use Chapter 7 Statement of Your Current Monthly Income, while we’ll use Chapter 7 Means Test Calculation for a median calculator.
Bankruptcy Means Test Definition
Bankruptcy can be defined as a mechanism that helps the courts determine whether a debtor has the means to pay a debt in Chapter 7 bankruptcy or not. You can see it as a mechanism for testing who qualifies for bankruptcy for easier understanding.
Chapter 7 bankruptcy is often regarded as liquidation bankruptcy. For this bankruptcy type, assets not exempted by a bankruptcy exemption are liquidated and distributed to creditors. Many people do not lose assets due to bankruptcy exemptions. For example, you can see the Florida bankruptcy exemptions that help protect assets.
For an individual to qualify for a Chapter 7 bankruptcy discharge, they have to meet the set income guidelines provided for the state. Beyond this, there’s also a household number guideline that an individual has to qualify for. Ascend’s chapter 7 means test calculator makes use of the latest Census Bureau Median Family income—the United States Department of Justice provides this, and it started taking effect on May 15, 2021.
Before you get Chapter 7 bankruptcy, an individual may first meet the strict requirement of the income guidelines provided by the debtor’s state of residence through means-testing. While many individuals work with a bankruptcy attorney who covers the bankruptcy means test, some file bankruptcy without an attorney, so understanding how the bankruptcy means test can be really important.
Let’s cover bankruptcy means test calculators and income limits by state.
Chapter 7 Calculator and Bankruptcy Income Limits By State
A Chapter 7 means test calculator can help you estimate your Chapter 7 qualification. For example, the calculators generally use the most recent means testing income limit guidelines by your state. Here’s a list below.
- Alabama
- Alaska
- Arizona
- Arkansas
- California
- Colorado
- Connecticut
- Delaware
- Washington DC
- Florida
- Georgia
- Hawaii
- Idaho
- Illinois
- Indiana
- Iowa
- Kansas
- Kentucky
- Louisiana
- Maine
- Maryland
- Massachusetts
- Michigan
- Minnesota
- Mississippi
- Missouri
- Montana
- Nebraska
- Nevada
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Ohio
- Oklahoma
- Oregon
- Pennsylvania
- Rhode-Island
- South Carolina
- South Dakota
- Tennessee
- Texas
- Utah
- Vermont
- Virginia
- Washington
- West Virginia
- Wisconsin
- Wyoming
Now that you can see the bankruptcy means test calculator and income limits by your state, let’s go into the different parts of the bankruptcy means test.
Means Test – Part 1
If your monthly income is less than your state’s average income, then you’ve passed the first stage of the means test, and you may not have to undergo any other test. As such, you may be issued a Chapter 7 bankruptcy discharge.
It’s imperative to remember that merely acing this test is no guarantee that you’ll get discharged. But it does brighten your chances.
You will be made to sign some forms in a competent court. One such form is called Schedule I. Another is Schedule J, while the last form is an Expense detailing form. In an instance where you have a significant sum remaining in your disposable income after detailing your monthly expenses, the bankruptcy court may be interested in digging in for further information.
Means Test – Part 2
In some instances, you may be allowed to deduct certain expenses for passing the Chapter 7 means test. Those expenses are often automobile loan payments, mortgages, health insurance, and childcare. Let’s take, for example, that you’re a high-earning debtor that earns an income that’s above the median income of your state. It’s still possible for you to pass the means test–provided that you’re able to meet certain criteria after deducting some permissible expenses. Here’s a full list of expenses that you’re allowed to deduct in calculating your means test:
- Income taxes
- Disability and health insurance premiums
- Compulsory employment deductions. E.g., retirement contributions, uniforms, and union dues.
- Child Care expense
- Child support payments and alimony
- Charitable contributions (limited by a specific percentage)
- Secured debts for home and car
Some special circumstances allow you to deduct some living expenses. However, the bankruptcy court will first require that you provide proof of each expense claimed on the Means Test. Additionally, it’s not all living expenses that you’re allowed to deduct. Some examples of deductible normal living expenses entail:
- Housekeeping supplies
- Clothing
- Utility expenses
- Transportation expenses
- Food
- Some health care expenses
- Some miscellaneous expenses
The extent that you’re allowed to deduct is solely dependent on the number of people in your household. To know the exact figure for this, we’ll recommend that you refer to the current national standards.
If, after using the calculator above, you noticed that you don’t qualify for a discharge. This other Chapter 7 means calculator uses part 2 of the means test–it does that through these bankruptcy forms; Chapter 7 Means Test Calculations and the Statement of Exemption from Presumption of Abuse Under §707(b)(2).
Conclusion
Chapter 7 bankruptcy is one of the most common debt relief options in the United States. A bankruptcy means test calculator can help you estimate whether you qualify for a Chapter 7 bankruptcy. The first part of the means test calculator helps determine income and compares it to the state income limits. As such, the second part of the means test helps estimate whether you qualify by utilizing actual expenses.