Chapter 7 Bankruptcy “Means Test”

There are different ways that the bankruptcy system decides if you qualify for Chapter 7 bankruptcy.  The main one is the ‘means test’, and only certain people have to take it.  If you make more than the median income for your State (by family size) you must take the ‘means test’, but if you make less than the median income then you automatically qualify for Chapter 7 bankruptcy and don’t even need to take the ‘means test’. Currently, these are the median income figures by family size in Massachusetts.

In Massachusetts, here’s the median income by family size (for cases filed after Nov. 1, 2017):

  • Family of one: $61,353
  • Family of two: $78,508
  • Family of three: $96,698
  • Family of four: $121,280
  • Add $8,400 for each additional family member.

If you make more than the median income listed above then you must take the ‘means test’, and you often will not qualify for Chapter 7 bankruptcy, but this is not cut and dry.  It depends on the amount of your secured debt payments, county of residence, whether you are married, have medical issues and a variety of other factors.  These items are factored into the test and, in part, determine if you “pass” the bankruptcy means test and therefore qualify for Chapter 7 bankruptcy.

Even if you “pass” the means test or do not have to take it all, there remains what is known as the totality of the circumstances tests under Section 707(b)(3) of the Bankruptcy Code.  This test asks the basic question (i.e. ability to pay) from a less technical perspective and can, at times, require that even people below the median income file Chapter 13 instead of Chapter 7 bankruptcy.

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