Calculating Income To Pass The Means Test

To file a Chapter 7 bankruptcy you must first pass what is known as the “Means Test.”  This test determines whether or not you or your family has sufficient disposable income to repay your creditors and is based on the median income levels of your state and cost of living guidelines.

The Means Test begins with calculating your average income over the six full months immediately preceding your filing bankruptcy.  For example, if you file bankruptcy in October, the Means Test would require that you average your income for the previous months; April through September.  It is important to note that if you are married and living with your spouse, both of your incomes must be included in your Means Test calculation, even if your spouse is not filing bankruptcy.

Income that must be reported for Means Test purposes include wages, salaries, tips, bonuses, overtime and commissions, as well as income from the operation of a business, rental income, interest, dividends, royalties, pension and retirement benefits, unemployment compensation and regular contribution to household expenses from others not your spouse, including roommates.  Social Security, alimony and child support are NOT included as income for the Means Test.

Determining your average monthly income is the first step to filing bankruptcy and should be done with care.  Please contact Matthew C. Bothwell, P.A. if you have any questions or need help with a bankruptcy.  At Matthew C. Bothwell, P.A., we are here to help.