Bankruptcy in Florida: How to Pass the Means Test for Chapter 7

Are you considering filing for bankruptcy in Florida? If so, your situation probably sounds a lot like this…

You have evaluated your financial situation and it is far from pretty. It’s clear you’re tired of the dunning calls and notices to catch up on your credit cards and medical bills, knowing full well that you would be paying those important debts if you were not so far behind. You think you may be eligible for bankruptcy so you can wipe away those debts, but the little information you can find online ends up creating more questions than answers. Perhaps the most confusing and intimidating aspect of bankruptcy is passing the means test. You’ve always hated tests in school, and now that your financial life is at stake you have to face yet another test to prove you are worthy of bankruptcy. Here is where you can relax and learn how to pass the means test for chapter 7 bankruptcy with the least stress possible.

Why There Is a Financial Means Test When Filing Bankruptcy in Florida

There are two types of bankruptcy that a person may file: a Chapter 7 bankruptcy or Chapter 13 bankruptcy. Chapter 7 is for the person who is so deep in debt they are seeking complete relief of their debts (called a discharge in the bankruptcy courts); conversely, a Chapter 13 filer believes that with some modifications to their current debt situation they can work their way out of some or all of the debt. However, it can be quite convenient for a person who has accumulated a lot of unsecured debt to try to duck out from under it by filing for Chapter 7 when their economic circumstances are such that with a little creative planning and adjustments, along with better management of their expenses, they can find a way out from under their mounting debt without needlessly stiffing their creditors. In other words, the financial means test is intended to identify those unfortunate individuals whose best path to a new financial start is a complete discharge of all debts and to also prevent the bankruptcy system from being abused by those able to settle their debts without full discharge.

There are several situations that will automatically exempt you from taking the financial means test. First, if most of your debts are not consumer debts, you are exempt from the financial means test. If your liabilities are mainly consumer debts, but you are a disabled veteran and accumulated that debt while on active duty or participating in a homeland defense incident, you are not required to take the financial means test.

Income Limits May Exempt You From the Financial Means Test

There is also a circumstance where you automatically qualify for Chapter 7 and are thus not required to take the financial means test. The state of Florida has developed a table of median income for Florida households with between 1 and 10 (or more) qualified members. If your income (for the last 6 months) falls below the median for the number of people in your household, you automatically qualify to file for Chapter 7 bankruptcy.

Income Guidelines for Chapter 7 Means Test

These are the annual median income levels for various household sizes (for cases filed on or after May 1, 2019):

  • 1 Member – $49,172 ($4,097/mo)
  • 2 Members – $60,400 ($5,033/mo)
  • 3 Members – $66,872 ($5,572/mo)
  • 4 Members – $78,833 ($6,569/mo)
  • 5 Members – $87,833 ($7,319/mo)
  • 6 Members – $96,833 ($8,069/mo)
  • 7 Members – $105,833 ($8,819/mo)
  • 8 Members – $114,833 ($9,569/mo)
  • 9 Members – $123,833 ($10,319/mo)
  • 10 Members – $132,833 ($11,069/mo)

If your income exceeds the amount in the table for your household size, you need to perform the financial means test to see if you qualify for a Chapter 7 filing. Alternatively, if your income dropped dramatically within the last 6 months, it may make sense to wait another month or two and see if you then fall below the median levels and are exempt from the financial means test.

For instance, let’s say you have a household of 4 members. If your income for the last 6 months averaged more than $6,569 per month, you are not exempt from the financial means test. But let’s further say that your income for the last 3 months was $6,000 per month and it was $7,500 per month for the three months preceding that, which would total an annual average income of $81,000. This was calculated by adding 3 months of income at $6,000 ($18,000) to the three earlier months of $7,500 income ($22,500); that total ($18,000 + $22,500) equals $40,500 for six months, or $81,000 for the year. As the table above illustrates, a household of four cannot have annual income exceeding $78,833, so they are disqualified thanks to an annual difference of $2,167 (or less than $200 per month), even though their monthly income plummeted by $1,500.

If you run the test again two months later, the picture changes dramatically. Now you have 5 months of income at $6,000 ($30,000) plus just one month at $7,500; added together, this totals $37,500 for six months or $75,000 annually ($6,250 per month). Now you fall below the median income level for a household of 4 and may file for a Chapter 7 bankruptcy without having to take the financial means test.

Comparing Your Income to the Annual Median Income

If your income exceed the levels shown in the table above, you must perform the financial means test to see if you qualify for a Chapter 7 filing. In this case, you need to calculate your income (this includes retirement and pension income, salaries, interest and dividends, unemployment income, and any amounts paid by others for your own household expenses). Once you have determined your total income, then deduct allowable expenses (mortgage or rent payments, personal expenses like food, household supplies, and transportation); the state establishes acceptable amounts for each type of expense depending upon the area in which you live in Florida.

After you have crunched all those numbers, subtract the allowable expenses from the declared income; this determines your total monthly income. If this number is less than $7,475, you pass the means test and can file for Chapter 7 bankruptcy. If this number exceeds $12,475, you fail the financial means test and cannot file for bankruptcy under Chapter 7. If you income falls between those two values, there are more calculations that need to be run before determining your eligibility for a Chapter 7 filing.

Financial means test forms can be obtained through the United States Courts website if you wish to take a closer examination of the different forms used. However, even when you know how how to pass the means test for chapter 7, wading through government forms intended for attorneys and others more conversant in bankruptcy laws can be frustrating and discouraging. Fortunately, for Florida residents, there is a better option: Florida Law Advisors. We are deeply familiar with the laws and procedures involving bankruptcy and can even provide you with a financial means worksheet that is easy for lay persons to understand. Contact us now and let us help you get back on track without being further harassed by your creditors.