The means test aims to determine whether you are eligible for Chapter 7 bankruptcy or if you have enough money to repay your creditors in full or in part. You only need to complete the calculations if your income exceeds the state’s average. If you earn less, you are exempt and do not need to complete the means test.
Income and Expenses
Income limits vary according to your household size. These averages are updated periodically by the IRS and the Bureau of Labor Statistics. Here are the current limits in Oklahoma.
- The median income for a single person is $43,109.
- The median income for a two-person household is $54,922.
- The median income for a three-person household is $58,260.
- The median income for a four-person household is $67,299.
- For each additional individual, the limit increases by $8,400.
The Means Test and Exceptions
The means test was introduced in 2005. It limits who can file under Chapter 7. If your income is higher than average and you fail the means test, you need to file under Chapter 13, which requires partial repayment. Chapter 7 liquidation bankruptcies are intended for individuals who are unable to repay their creditors. Usually, this means that you earn less than the state’s median or have substantial expenses.
You can still file for a liquidation bankruptcy if you earn more than the median but don’t have enough disposable income to pay off at least 25 percent of your unsecured non-priority debts or a total of $6,000 over the next five years. The courts use whichever number is larger. If you don’t qualify for Chapter 7 protection, the good news is that you can keep your assets and property with a Chapter 13 bankruptcy, so it might be a better option for you anyway.
Other Considerations
Before you file for bankruptcy, your attorney will complete several official forms regarding your monthly income and expenses. The forms that are required depend on whether you are filing under Chapter 7 or Chapter 13. If your income is between certain limits, additional calculations are required. Special considerations may apply if your income has decreased.
For personal advice based on your situation, call my office at 405-216-0007. We can arrange a convenient time to review your finances. I am an experienced bankruptcy attorney and a former state-appointed Chapter 7 trustee. I have served residents of Oklahoma City, Edmond, Norman and the surrounding area for more than 25 years.
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