4. Do You Pass the Means Test?

The means test is a complicated formula that determines whether a person is eligible or a simple chapter 7 “liquidation” bankruptcy. The means test was added to the bankruptcy law by Congress in 2005. The idea of the means test is that if you have the means to pay back some or all or your debt, you are not eligible to file a chapter 7 bankruptcy and must file a chapter 13 or chapter 11 bankruptcy and pay back what you can afford to pay of your debt.

Basically the means test compares your annual income based on the last six months of your earnings with the average annual income of a family the same size as yours in your state.
If your income is less than the average, you pass the means test automatically. If your income is greater than we have to deduct certain allowed expenses from your income to calculate what is your disposable income. If you have a significant of disposable income, then you cannot file a chapter 7 bankruptcy.

In California the median family income for families of the following sizes are as follows:

1 Person 2 Persons 3 Persons 4 Persons
$47,234 $61,954 $67,562 $77,596

If you have questions about whether you pass the means test, call Evan Livingstone at (707) 206-6570 or email him at evanmlivingstone@gmail.com for a free consultation.

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