There are people all across the state of Florida who are struggling to pay their bills and who are buried under insurmountable debt. One of the options that many of these people may seek is debt relief through filing a Chapter 7 bankruptcy. This will allow them to liquidate their assets in order to pay off or otherwise discharge their debts and give them an opportunity at a fresh financial start. However, depending on your level of income you may or may not qualify for a Chapter 7 bankruptcy. In order to determine whether or not you qualify, you will have to take the means test.
The means test is a formula used by the government to determine whether your income is low enough to qualify to file for Chapter 7 bankruptcy. This was implemented in 2005 through an amendment to the bankruptcy laws in order to prevent wealthy individuals from filing for Chapter 7 bankruptcy, while those individuals that fail the test can file for Chapter 13. The means test does not necessarily mean that you need to be extremely poor in order to qualify for Chapter 7, because you can still have a fairly high monthly income if you have a high amount of expenses.
Eligibility for Chapter 7 Bankruptcy
Given their choice, most people who are preparing to file for bankruptcy would choose Chapter 7 over Chapter 13 for the simple reason that Chapter 7 is faster. It normally only takes a few months to complete a Chapter 7 case, far less than the three or five years required for a Chapter 13. In addition, Chapter 7 allows the individual to enjoy the benefits of the bankruptcy discharge without paying another penny to the creditors, whereas Chapter 13 requires continued repayment for a limited period of time. Not everyone, however, is qualified for Chapter 7.
The U.S. Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) in 2005, making it now more difficult to meet the requirements for declaring bankruptcy under Chapter 7. The purpose of this act is essentially to prevent unscrupulous individuals from taking an unfair advantage of the powerful legal shelter provided by bankruptcy. Before you can move forward with your case, therefore, you will have to pass a means test.
How the Means Test Works in Florida
The means test is used in cases in which the debtor's current monthly income is higher than the state median, a figure that depends on the size of the household. In Florida, the current median income according to household size is:
- 1 person – $41,065
- 2 person – $50,711
- 3 person – $53,820
- 4 person – $63,937
- 5 person – $71,437
If your income is above this level, then you will have to pass the test, which involves computing your aggregate monthly income over the past five years and comparing it to either a set income threshold or to a percentage of your debt. Fortunately, there are several state exemptions that can be claimed in order to improve your chances of qualifying, so you should not let the fact that your income exceeds the applicable level to prevent you from taking action.
Help with Passing the Bankruptcy Means Test
When you contact us at The Law Offices of Justin McMurray, P.A. for a free consultation with a Jacksonville bankruptcy attorney, we can take the time to review your financial situation to determine whether you can meet this requirement. In the event that you cannot, you are still most likely eligible for Chapter 13 bankruptcy, which, although more time consuming, will still make it possible for you to get out of debt and which has many advantages of its own. Contact us now to learn more and to get started on your case!