The Ins and Outs of Income Testing for Chapter 7 Bankruptcy

If you are looking to file for Chapter 7 bankruptcy, one of the things you need to pass is the median income test. The median income test – and its companion, the means test – is a formula that is used to determine whether or not the person seeking to file has enough money to make payments to creditors.

If so, they must file for Chapter 13 bankruptcy instead of Chapter 7. These tests were added in 2005 when the bankruptcy code was amended to stem the tide of Chapter 7 bankruptcies.

Testing Details

If you want to file for Chapter 7, or liquidation bankruptcy, it is necessary to measure your monthly income figure against the median income for your household size in your state. As long as your income is not greater than the median income, you typically are eligible for filing Chapter 7 bankruptcy.

In Florida, the current median income is (as of October 2010):

-$41,079 for a one-person household

-$52,073 for a two-person household

-$58,366 for a three-person household

-$68,763 for a four-person household

If your income is greater than the median income, you have to be able to pass the means test to continue with Chapter 7.

The means test looks at how much of your income is disposable. To determine this, required debt payments and certain expenses are subtracted to find out whether you would be able to complete a Chapter 13 bankruptcy, which is a restructuring of debt. If your disposable income each month falls below a certain threshold, you will be able to file for Chapter 7 even if your income is higher than the median income level for your state. If not, you will have to file for Chapter 13 bankruptcy.

The means test can be complex. There are many factors that can affect the outcome of a means test, such as family size and living expenses and write-offs such as charitable contributions and insurance policies.

For more information about the means test, and how it impacts your particular situation, contact an experienced bankruptcy attorney.

O. Reginald (“Reggie”) Osenton is the Owner and President of Osenton Law Offices, P.A. If you need a Brandon bankruptcy lawyer, Tampa bankruptcy lawyer, or Tampa bankruptcy attorney, call 813.654.5777 or visit