How does the means test apply to me?

The means test is one of the most complicated parts of the bankruptcy code.  It was designed in 2005 when the bankruptcy laws were rewritten to try and make the process fairer.  Specifically, the means test averages your income during the last six months and deducts that average from your monthly expenses.  Some of your monthly expenses are determined by an IRS standard amount (food, clothing, etc.) and some are determined by your actual expenses, such as medical premiums. 

When you subtract your monthly expenses from your current monthly income (CMI) you end up with a number called your disposable monthly income (DMI).  If your DMI is less than about $200 per month, then you should qualify for a chapter 7 bankruptcy.   Some people will not be subject to the full means test if their income is below a certain level, called the median family income.  For example a single person in Alameda County who makes less than $69,660 per year automatically qualifies for a chapter 7 bankruptcy.  However if you make more than the median family income and your DMI is more than $200, then you will have to consider filing a chapter 13 bankruptcy.   

Call us at 510-556-1160 or schedule your free consultation by clicking below and we will perform the means test for you free of charge.