Can Chapter 7 Be Filed If The Household Is Over The Median Income?

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Can Chapter 7 Be Filed If The Household Is Over The Median Income?

When people are having financial difficulties many turn to the internet to try to diagnose and treat the problem on their own.  Many people will find information regarding the Means Test, which is requirement for filing Chapter 7 or Chapter 13.  It is the first step in deciding if someone is eligible for Chapter 7 or it could dictate what a Chapter 13 payment needs to be.  The biggest issue is that people look at the median income for their household size and if they are even a penny over, think that they are not eligible to file Chapter 7.  I have even had people tell me that other “bankruptcy attorneys” have told them the same thing.  This is not true.

The whole point of the Means Test is to determine if someone may still file Chapter 7 even if they are over the median income for their household size.  If it was as easy as determining your monthly income and simply looking to see if you are over the median income, there would be no test.  The Means Test is based only on the last 6 months of income for each person working in the household.  This monthly average is annualized and then compared to the median income.  If the number is over the median income then you complete the rest of the test in order to see if Chapter 7 is a possibility. 

This Means Test is not something that can be done by a non-attorney and, frankly, many attorneys do it incorrectly.  If someone is looking to file Chapter 7 and is over the median income they should consult an attorney to complete the Means Test and give them their bankruptcy options.

Ms. Marrs is a 1992 graduate of the University of Wisconsin-Stevens Point with a degree in Business Administration and a minor in Economics. She received her law degree from Thomas M Cooley in 1998. Ms. Marrs practices in the areas of bankruptcy including adversary proceedings.

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