An individual preparing to file for personal bankruptcy must take a means test to determine whether they qualify to file a Chapter 7 bankruptcy. The bankruptcy means test in Florida requires an applicant to have an income below a specified amount to be eligible for a Chapter 7 bankruptcy.
There are several steps required to complete the means test and determine your eligibility for a Chapter 7 bankruptcy filing. If you have overwhelming debt and are considering bankruptcy in Central Florida, you should consult an experienced Orlando bankruptcy lawyer with Florida Law Advisers, P.A. We can help you understand the requirements for seeking a Chapter 7 bankruptcy, review your eligibility, and develop a comprehensive plan to help alleviate your financial troubles.
Any Florida resident who is facing insurmountable debt has a right to seek protection from creditors by taking advantage of the tools provided by the federal bankruptcy code. Filing for Chapter 7 bankruptcy may be a valid option when facing difficult times. The complexity of the means test should not be a barrier to seeking bankruptcy. Contact Florida Law Advisers, P.A. today to schedule a free consultation and analysis of your financial situation with an experienced and dedicated bankruptcy attorney.
What Is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy allows a qualifying individual to discharge large portions of their unmanageable debt. Chapter 7 is known as liquidation bankruptcy because the bankruptcy trustee handling the case may sell certain assets to pay debts. However, Florida law allows you to claim exemptions that prevent many of your assets from being sold, including your home, a motor vehicle, some personal property, and retirement accounts.
Filing for bankruptcy under Chapter 7 also stops debt collection efforts. As soon as you file your bankruptcy petition, creditors are required to halt all collections activity, including foreclosures, lawsuits, and wage garnishments.
A Chapter 7 bankruptcy will discharge most debt, including:
- Credit card balances, including overdue fees and late fees
- Medical bills
- Past-due utility bills
- Past-due rent
- Collection agency accounts
- Personal loans
- Business debt
- Most civil court judgments
- Most attorneys’ fees
- Overpayments by government programs, such as Social Security and welfare
- Most auto accident claims.
What Is the Chapter 7 Bankruptcy Means Test?
Debtors in Florida must qualify for Chapter 7 bankruptcy by passing a means test. There are two ways to qualify.
If your average income over the most recent six months is less than the state median income for a household of the same size as yours, you pass the means test and can proceed with a Chapter 7 filing.
If you do not qualify under the first test, you must show that your projected disposable income for the next five years is between $9,075 and $15,150 and that the income you have left over after subtracting all allowed deductions is enough to cover 25% of your unsecured, nonpriority debt. Chapter 7 disposable income limits are subject to adjustment on April 1, 2025, and every three years after that.
To determine disposable income, you first add up the cost of your living expenses and subtract that sum from your gross income. This is done on a government form similar to a tax return form. Some of the costs you are to list are standardized figures that apply to the community where you live or your metropolitan statistical area. To complete this form, you must complete a Chapter 7 Statement of Your Current Monthly Income.
Understanding the Bankruptcy Means Test
The Chapter 7 Means Test Calculation form requires listing figures for such expenses as:
- Food, clothing, and other items
- Out-of-pocket health care expenses
- Mortgage or rent and household utilities
- Household insurance and operating expenses
- Vehicle ownership or lease expense
- Vehicle operation expense
- Local transportation expenses
- Public transportation expense
- Involuntary payroll deductions, such as retirement contributions, union dues, and uniform costs
- Life insurance
- Court-ordered payments, such as spousal or child support payments
- Education required by your job or for your physically or mentally challenged dependent child if not available through public education services
- Additional health care expenses, excluding insurance costs.
If You Pass the Bankruptcy Means Test
If you pass the Chapter 7 bankruptcy means test, you qualify to file a Chapter 7 bankruptcy case. You must complete a credit counseling class from an approved debtor agency within 180 days of filing your bankruptcy petition. You must also take an approved course about personal financial management and file the certificate of completion with the court before any of your debts will be discharged. Otherwise, your case will be closed without discharge.
When you file a Chapter 7 petition with the Bankruptcy Court for the Middle District of Florida in Orlando, you must also file with the court:
- Lists of your assets and liabilities
- Schedules of current income and expenditures
- Records of any interest in education or tuition accounts
- A statement of your current financial affairs
- A schedule of current leases and contracts under which an obligation remains to be fulfilled by either party to the contract
- A schedule of exempt property
- Tax return or transcript for the most recent tax year and any tax returns filed during the case, including tax returns for prior years that had not been filed when the case began.
If you are married, you must provide a description of your spouse’s income and any jointly owned property or debts, even if your spouse is not a party to the bankruptcy filing.
The court will appoint a bankruptcy trustee to oversee your case. The trustee will look for nonexempt property you own that can be sold off to pay your creditors. If anything can be sold, the trustee will oversee the sale and distribution of the proceeds to your creditors. The trustee is obligated to ensure that your creditors are paid as much of what you owe them as possible.
The trustee will also preside over a “Section 341 meeting” of you and your creditors, where you must answer questions under oath about your property and financial affairs. This is the only time you must go to bankruptcy court. We will prepare you so you know the kinds of questions to expect at the creditors’ meeting and accompany you.
What Happens If You Fail the Bankruptcy Means Test?
If you are ineligible for Chapter 7, other forms of debt relief may still be available to you. For instance, you may want to explore filing for Chapter 13 bankruptcy, which is known as the income-earners bankruptcy and requires a multi-year plan to pay your debt, or a Chapter 11 filing, a business bankruptcy available to individuals under certain circumstances.
With our legal assistance, it may be possible to pursue an out-of-court settlement agreement with your creditors. Debt settlement and relief plans are legally binding contracts between you and your creditors, usually negotiated for unsecured debt, like credit card balances and personal loans.
In a typical plan, you would agree to set aside money in a special savings account each month until you have enough to pay the settlement figure the creditor has agreed to accept. When the agreed-upon payment has been made, the debt is satisfied.
How Our Orlando Bankruptcy Lawyers Can Help You
An Orlando bankruptcy lawyer with Florida Law Advisers, P.A., is ready to help if you are falling further and further behind on repaying the debts you owe. Contact us for a free consultation about how we can help you:
- Determine your need and eligibility for bankruptcy
- Organize financial information and submit it to the Chapter 7 bankruptcy means test
- Prepare a Chapter 7 bankruptcy filing or explore alternative solutions to your debt problems
- Protect assets you don’t want to lose through liquidation
- Communicate with your creditors
- Uphold and exercise your legal rights and the protections that bankruptcy law provides you.
Contact Our Orlando Bankruptcy Lawyers
If you recognize that you are unable to pay your debts, you may have the right to file a bankruptcy claim and start over. The experienced Orlando bankruptcy attorneys at Florida Law Advisers, P.A., can review your financial status and help you take action that will position you to make a fresh start to move forward with your life.
We can work with you to get you through the Chapter 7 bankruptcy means test and prepare a Chapter 7 bankruptcy filing if a personal bankruptcy claim is the best option for you. More than 99% of Chapter 7 bankruptcy filers receive a discharge. A Chapter 7 filing could be the answer for you, too.
Contact Florida Law Advisers today for a free and confidential consultation about pursuing a Chapter 7 bankruptcy and other options available to you. We can find a way to help you now. Don’t put it off while you fall farther behind.