Guide to the Bankruptcy Means Test

The bankruptcy means is an important component of bankruptcy. It determines whether you are eligible to file a Chapter 7 bankruptcy as well as whether you must be in a 3 or 5 year plan if you file a Chapter 13 bankruptcy. Its formula is designed to keep filers with high incomes from using Chapter 7 to wipe away their debts and instead put those filers into Chapter 13 where they will have to pay back at least a portion of those debts.

How Does the Means Test Work?

The first step of the means test is to determine your average monthly income for the last 6 months, and then compare that figure to the median income for a family of the same size in Illinois.  If your income is above the median income you may have trouble filing a Chapter.  For purposes of a Chapter 13, if your income is below the median income your plan will likely last 3 years, and if it is above the median income you plan will likely last for 5 years.

Currently in Illinois the Median Incomes as of April 1, 2014 are as follows:

Household Size Monthly Median Income Annualized Median Income
1 $4,019 $48,232
2 $5,179 $62,150
3 $5,920 $71,040
4 $6,906 $82,876
5 $7,581 $90,976

If your income is less than the median for a household of the same size above, you pass the means test! You do not need to go on any further and you qualify for Chapter 7.

If your income is more than the median for a household of the same size above, you may still qualify for Chapter 7 but a more detailed analysis will need to be done. The amount and types of your debts will have to be computed and compared with your income and household expenses. This can be done either over the phone or with a sit down consultation free of charge.

To find out more about the means test and Chapter 7  and Chapter 13 bankruptcy call us at 309-467-3213 or send us a message online.

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