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Understanding the Means Test for Personal Bankruptcy Protection

On Behalf of | Sep 2, 2014 | Bankruptcy

The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) amended the U.S. Bankruptcy Code in 2005 as part of a widespread overhaul of the system. The BAPCPA put into place new eligibility requirements for obtaining Chapter 7 bankruptcy protection. The provisions make it tough for individuals who have acquired mainly consumer debts, but who earn an above-average income for a household in Minnesota of similar size. The formula for determining Chapter 7 eligibility is called the means test.

Median family income is adjusted every year based upon the Consumer Price Index for All Urban Consumers (CPI) and the data is published by the Census Bureau. This information is used in means test calculations. The annual median income for a family of four in Minnesota is $92,277. For one person, the annual median income is $49,592.

Keep the following steps and factors in mind as you approach taking the means test for determining Chapter 7 eligibility:

  • Calculate your household’s median income over the past 180 days preceding your bankruptcy filing.
  • Review the median income in Minnesota.
    • If your income is less than the median income in Minnesota, you pass the means test and qualify to file for Chapter 7 bankruptcy.
    • If you make more than the median income, contact the experienced attorneys at Hess & Jendro Law Office, P.A. who might be able to apply allowable actual monthly expenses to satisfy the requirement.
    • Subtract your allowable monthly living expenses from your income.
    • Determine whether the disposable income remaining satisfies the means test.

If you fail the means test, you can still file for bankruptcy under Chapter 13. In fact, some circumstances make Chapter 13 or another remedy a better option even if you are eligible for relief under Chapter 7 bankruptcy.

For help with means test calculations and to discuss the form of debt relief that is right for you, consult with an experienced Minnesota bankruptcy lawyer about your case.