Signing Document

The Chapter 7 Means Test Explained

Most people in Morristown can sympathize with those struggling with debt. At the same time, however, there may still be a stigma associated with personal bankruptcy. Many might believe that it is simply a way for people to escape from having to pay their debts. The fact that (according to information compiled by the American Bankruptcy Institute) over 63 percent of non-business bankruptcy filings in 2018 were made under Chapter 7 (which allows debts to be discharged) might be seen as affirming this assumption.

Yet federal bankruptcy regulations are structured in such a way as to make it difficult for people to abuse the debt relief privileges afforded by bankruptcy. The Chapter 7 means test is an example of this. It regulates Chapter 7 eligibility by taking a closer look at the income and debts of those seeking bankruptcy protection.

Per the website for the Administrative Office of the U.S. Courts, before the means test is applied to one’s bankruptcy case, their current monthly income is compared to the median value for their unique demographic for their state. If it is less than that median amount, the filer automatically qualifies to file under Chapter 7. If it is above that amount, then a review is done of the filer’s aggregate monthly income over the previous five years. That amount must be lower than either 25 percent of the filer’s nonpriority unsecured debts or $12,850 in order to be eligible.

If one does not qualify to file for Chapter 7 bankruptcy due to the means test, their case is often converted into a Chapter 13, which affords them bankruptcy protection with the understanding that their debts will be repaid over a period of 3-5 years.

Categories

Get To Know David & Robert

  • David  Alan Ast Photo
    David Alan Ast
    Firm Partner David Alan Ast has more than 25 years of experience helping people throughout northern New Jersey get a fresh start and move forward with their financial lives. He is committed to protecting the rights of his clients seeking debt relief.
  • Robert L. Schmidt Photo
    Robert L. Schmidt
    Firm Partner Robert L. Schmidt earned his Bachelor of Arts in Business Administration and Finance from Stockton State College in 1990. Three years later, he earned his Master’s degree from Rutgers University School of Business in Camden with a major in finance. Robert then acquired his J.D. from James E. Beasley School of Law at Temple University in 1997.
/

Real Stories Inspired From Real Situations

Reviews
  • “They were always understanding of our concerns and patient with our questions. Thank you all!”

    - Ann R.
  • “One that is there to help instead of someone who will treat you like another number. 5 stars isn't enough.”

    - M.H., Chapter 7 Client
  • “'m am very grateful to have hired this firm. It was smooth and now I can breathe again. Thank you, everyone, at Ast & Schmidt.”

    - Rich L.

What Sets Us Apart

How We Can Help You 
Move Forward
  • Personalized Services Tailored for You
  • Over 30 Years of Bankruptcy Experience
  • Free Initial Consultations
  • Available After Hours by Appointment
  • Direct Advice from Our Attorneys
  • Realistic Expectations Provided

Begin Your Fresh Start

Our team has over 30 years helping clients.  Let us help you.
  • Please enter your first name.
  • Please enter your last name.
  • Please enter your phone number.
    This isn't a valid phone number.
  • Please enter your email address.
    This isn't a valid email address.
  • Please make a selection.
  • Please enter a message.