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The Means Test

Trouble with the Means Test? We Can Help!

Experienced Houston debt relief attorneys provide reliable counsel

If you are considering filing for personal bankruptcy, you may have heard of the means test, which is an important requirement for Chapter 7 bankruptcy. The means test was created to ensure that individuals who had the ability to repay a substantial amount of their debt didn’t file for a quick discharge of debt simply to frustrate their creditors. Instead, those filers would have to go through Chapter 13 and begin a payment plan. At the Law Office of David A. Fernandez, P.C., we want to make sure that you understand your legal options, and that you get every advantage permitted under the law. We advise clients on a number of debt relief strategies, including consumer bankruptcy. We can evaluate whether bankruptcy is the best option for you and guide you through every step of the process.

Step 1 of the means test: comparing your income to the state median

To qualify for Chapter 7 bankruptcy, the filer must demonstrate income below the median amount for a household of the same size. You would take into account your total income for the six months prior to filing, being sure to include your income from all sources, not just your regular paycheck. You do not have to count Social Security income or tax refunds. Next, you would divide this amount by 6 to get your six-month average, which is your current monthly income. Multiply this number by 12 to reach your annual income.

You would then compare your annual income to the median income for a Texas family of the same size. For example, in April 2018, the applicable figures were as follows:

  • Single earner — $47,238
  • Two-person household — $63,148
  • Three-person household — $69,294
  • Four-person household — $78,572

These amounts change about every six months, so make sure you are looking at a current list. If you make as much or less than the median income for a family of your size, you qualify to file Chapter 7 bankruptcy.

Using expenses to get below the means test threshold

If your income is above the median, you can use allowable expenses to get below that threshold. For this step, you don’t use your actual expenses. You would apply standards from the U.S. Department of Justice based on information from the Census Bureau and the Internal Revenue Service. Items you might claim as expenses include:

  • Food and clothing
  • Out-of-pocket healthcare expenses
  • Housing and utilities
  • Transportation expenses

Expense calculation is complex and can be very confusing. Fortunately, you can rely on an experienced bankruptcy attorney at our firm for detailed assistance. If we can qualify you for Chapter 7, we’ll explain the process fully so you can make an informed decision about how to proceed. If you don’t qualify for Chapter 7, we can explain the benefits of Chapter 13 bankruptcy and other debt relief strategies.

Finally, certain filers, such as service members who accumulated debt during active duty, are exempt from the means test.

Contact our Houston law firm for a free phone consultation and bankruptcy advice

At the Law Office of David A. Fernandez, P.C., we’re dedicated to helping consumers get debt relief in the manner most appropriate for them. If you have questions about qualifying for Chapter 7 bankruptcy, we have the answers. To schedule an appointment with a consumer law attorney, call our firm at 713-893-8509 or contact us online.

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