Since the bankruptcy code changed in 2005, there has been much confusion about the new means test and how a debtor can qualify to file Chapter 7 bankruptcy. Most people that are interested in filing bankruptcy go immediately to the median household income chart online and see if they qualify under those numbers. The part that confuses everyone is calculating the current monthly income. Before contacting a bankruptcy attorney, many people will disqualify themselves by going to this chart because they believe they make too much money. It’s not an absolute if you are an above median income person, you might still qualify for Chapter 7 bankruptcy. Those individuals that are looking into filing bankruptcy usually take a look at their paycheck stub and see what they made over the last year. When it comes to a bankruptcy filing and the means test calculating it that way will be way off. The means test is only part of the equation and it actually involves multiple calculations to come up with the CMI or current monthly income. Using the means test to calculate the median income is done by taking the last six months starting with the preceding month. Next, you add all those numbers together and divided by six to get your average. Last of all, you multiply it by 12 to get your CMI. Basically, if your average is less than the median income number for th size of your household in your state, you pass.
The problem that confuses the true qualification for filing bankruptcy is the budget of evaluation that is required to come up with the disposable income of the debtor. The debtor has to have less than $170 a month left over after paying all their household expenses. This does not include the bills that the debtor wants to wipe out in the bankruptcy filing. Technically, even if the debtor makes less than the median income for their state, if they have excess disposable income left over each month they won’t qualify to file Chapter 7 bankruptcy and can be forced into Chapter 13.
This is a balancing act that a bankruptcy attorney is very knowledgeable in. In many cases, a bankruptcy attorney can qualify a person to file for bankruptcy that is under 120% of the median income for the state. Usually, when a debtor is filling out their expense report they forget a lot of expenses they actually incur to live. A bankruptcy attorney will make sure that all expenses are accounted for and hopefully be able to qualify them to file for bankruptcy.