The Bankruptcy Abuse Prevention and Consumer Protection Act was enacted in 2005, and it included the requirement for a Chapter 7 Means Test. The goal of the Florida Means Test is to ensure that Chapter 7 bankruptcy protections are reserved for those who genuinely need it. In Florida, applicants are required to earn an income below a specified amount in order to be eligible for Chapter 7 bankruptcy. Determining eligibility for Chapter 7 can be complicated, so if you are considering bankruptcy and wondering if you qualify, it is best to call a bankruptcy attorney to discuss your options.

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Below we will discuss the steps involved with the Florida Means Test.

  1. If your average income in the last 6 months is under the state median income for a household of the same size as yours, you automatically pass the Means Test and do not need any further qualification. If your income is above the state’s median income (click here to check current Florida levels), proceed with the Means Test to determine Chapter 7 eligibility.
  2. The second step requires calculating monthly disposable income, which is determined by subtracting allowable expenses from gross monthly income. We then multiply monthly disposable income by 60 to determine how much disposable income you will have over the next five years. If the projected disposable income is less than $7,025, you will pass the Florida Means Test.  If your projected disposable income is greater than $11,725, you will not satisfy the Means Test. If the number is between $7,025 and $11,725, you may still be eligible for Chapter 7 bankruptcy – as long as that disposable income is less than 25% of outstanding unsecured debt.  Failing all else, you may still qualify for Chapter 7 if special circumstances warrant it.
  3. Those who are ineligible for Chapter 7 may wish to ask a bankruptcy attorney about filing for Chapter 13 bankruptcy.

What is Included in Monthly Income?

When calculating monthly income for your means test, you must include:

  • gross wages, salary, tips, bonuses, overtime, and commissions (before deductions)
  • alimony payments
  • any amounts received regularly for household expenses (partner, children, parents, roommates)
  • child support payments
  • net income from a business, profession, or farm
  • net income from rental or real property
  • interest, dividends, and royalties
  • compensation from unemployment
  • retirement income or pension
  • income from any/all other sources

Exemptions: You are typically not required to report Social Security benefits or government payments associated with a disability, combat-related injury or disability, or death of a uniformed services member.

If you are uncertain about whether a payment is required to be included in the Means Test calculation, enlist the advice of an experienced bankruptcy attorney.

Are You Exempt from the Means Test?

There are circumstances that may render an individual exempt from taking the Means Test for Chapter 7 bankruptcy.

  • Military personnel and veterans can determine if they are exempt by reviewing the exemption qualifications under bankruptcy statute § 707(b)(2).
  • Those with more business debt than consumer debt are exempt from the means test. Business debts are those incurred in an effort to run a profitable business, while consumer debt includes rent and mortgage balances, food and clothing, utility expenses, and credit card purchases for personal items and entertainment.

Note: Some courts also characterize student loans as business debt. Be sure to check with a bankruptcy attorney as to eligibility.

Don’t Let the Means Test Discourage You

Bankruptcy can be complicated and stressful. When you are feeling overwhelmed, speaking with an attorney who is knowledgeable, experienced, and compassionate can make all the difference.

If you are confused about the Means Test or want to better understand your options surrounding bankruptcy, call the law offices of Richard V. Ellis. We are here to help.