BlogWhat is the Bankruptcy Means Test and How Does It Affect You?

April 5, 20220

Prior to the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act, in 2005, there was no income limit on who could file for bankruptcy under Chapter 7. The new law changed that through something called the “Means Test”. The means test looks at the debtor’s household size and all sources of household income. It then compares that income to the median income in the state for that household size. If the debtor’s household income is above the median, he is considered to be “above median” income and will not be eligible for Chapter 7 bankruptcy unless he has enough “deductions” to reduce his disposable income below a certain level. [More on that in a future post].

The median income numbers are reviewed annually and new numbers are published. New “median income” numbers were just published for Mississippi on April 1, 2022 as follows:

Household Size Annual Median Income
One $45,317
Two $54,584
Three $58,459
Four $71,528
Five $80,528
Six $89,528

First, look at your household size. If your household income is at or below the median, you will probably be eligible to file bankruptcy under Chapter 7. If it is above the median income, you will then have to take into account any deductions you may have such as car payments, house payments and domestic support obligations. If you have enough of these deductions, you may still be eligible for Chapter 7. If not, you will have to utilize Chapter 13, or in very rare cases, Chapter

Keep in mind that even if you ARE eligible for Chapter 7, it may nevertheless be beneficial for you to file under a different chapter.

The rules are complex. Give us a call at the law office of Paul Caston, and we will be glad to walk you through the process during a free initial consultation.

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