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Bankruptcy Means Test

What Is Required to Qualify for Chapter 7

In order to file for bankruptcy under the terms of Chapter 7 you must either be below the median income or, if you are above the median income, pass the Chapter 7 means test. If you are below the median income you do not have to take the means test. When determining whether you are eligible for a Chapter 7 bankruptcy, we must determine your average monthly income for the six months prior to your filing for bankruptcy. Under bankruptcy laws, you must include financial assistance you received from family members, financial gifts given to you, income from any jobs you have held, and the income of your live-in spouse, even if he or she is not filing for bankruptcy. If you own a business, you must include all income generated from your business. However, business expenses and Social Security income are exempt.

What if My CMI Exceeds Indiana's Median Income?

If your CMI is greater than Indiana's median income for households of a similar size, you can claim a number of deductions which may help you qualify for filing Chapter 7 bankruptcy. In order to determine if you are qualified after claiming applicable deductions, a complicated formula must be used. The formula deducts eligible expenses from current monthly income (CMI) to determine a person's disposable monthly income (DMI). Here, DMI is supposed to reflect the amount of money you have available to pay creditors. Contact our Indianapolis firm today to learn if you qualify for debt relief through consumer bankruptcy.

In general, the following kinds of expenses can be deducted from CMI in order to determine DMI:

  • Medical expenses
  • Health savings accounts
  • Education costs
  • Housing costs
  • Certain living expenses
  • Child care costs
  • Tax withholding
  • Alimony
  • Child support
  • Qualified retirement deductions
  • Car payments
  • Transportation costs

This list, however is not exhaustive. To learn more about other kinds of deducations, it's important to consult an attorney.

Avoid Unwanted Legal Problems -- Contact Indianapolis Bankruptcy Lawyer

Calculating NMI is very complicated. In order to do so, sophisticated computer software must be used. If mistakes are made or the court doesn't believe you, a United States Trustee or creditor affected by your bankruptcy can petition the court to deny your Chapter 7 bankruptcy. In fact, under Section 707(b) of the Bankruptcy Code, your petition can be denied even if you pass the bankruptcy means test.

If you are unsure whether you qualify for Chapter 7 bankruptcy or have questions about the means test involved, contact Indianapolis, Indiana bankruptcy attorney Portia Douglas today to schedule an appointment and discuss your case.

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