#1 Rated Bankruptcy Lawyers in San Diego

GET OUT OF DEBT
GUIDE

Bankruptcy Means Test California

The New Bankruptcy Law in 2005 (the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, or “BAPCPA”) added a new “qualification” standard for Chapter 7 called the “Means Test.” We’ll explain the Means Test below. Before BAPCPA, it was very rare for a Chapter 7 case to be dismissed because of a finding of “abuse” of the Bankruptcy laws. These earlier findings of abuse tended to happen where a debtor had very high income and could easily afford to pay back some debts over time, but instead chose to file Chapter 7 and discharge the debts. Again, it was rare and the Courts seemed to take action when there were very clear cases of this so-called abuse of the law.

But BAPCPA now requires every Chapter 7 debtor to qualify under the Means Test and there is a very complicated formula that can cause confusion and dismay for people facing bankruptcy. Hopefully, we can simplify the Means Test for you and show you how it may or may not apply to you.

We offer a free Means Test as part of your FREE CONSULTATION when you meet with us. So if you have any concerns about this issue, please call us at 1(800) 551-7922 and let us put your mind at ease.

You should note, however, that if you have rising income or income that has gone up or may go up quickly, you may still have a chance to file Chapter 7 if you call us right away. As you’ll see below, the method used to determine your income is not an annual test, but rather, it looks backwards at your last six months of income. So you may still be entitled to relief in Chapter 7. Don’t wait, call us.

Page Table of Contents [show]

Determine Whether Your Income Is Above The “median Income”

The rules for the Means Test are contained in the Bankruptcy Code at Section 707(b). The Means Test requires us to first determine if your income is above or below the “Median Income” level for similar households in your state. The United States Department of Justice website has the actual tables where you can find your state and match your household size and type. The figures used are based on Census Bureau statistics.

Bankruptcy Median Income Level for California

California Median Income Standards for Means Test for Cases Filed On or After May 1, 2021


Household SizeMonthly IncomeAnnual Income
1$5,244.83$62,938.00
2$6,952.92$83,435.00
3$7,727.92$92,735.00
4$8,877.50$106,530.00
5$9,627.50$115,530.00
6$10,377.50$124,530.00
7$11,127.50$133,530.00
8$11,877.50$142,530.00
9$12,627.50$151,530.00
10$13,377.50$160,530.00

The Means Test requires that we look at the income “derived” during the 6 month period before you file your bankruptcy petition. All of your income must be included in your calculations except for (1) payments you received under the Social Security Act (including Social Security Retirement, SSI, SSDI, and TANF); (2) payments to victims of war crimes or crimes against humanity; and (3) payments to victims of international or domestic terrorism.

Another income consideration for some people is “irregular income,” when your income varies widely over time. This can happen to people that earn commission income or people that receive large bonuses. You will need to consult with us because the Courts have different ways to look at your income depending on how your income is “derived”; and we will be able to guide you through any difficult issues and provide you with solutions.

If your income is BELOW the Median Income that applies to your situation, you are generally safe and you will not have to further qualify under the new Means Test. But if your income is ABOVE the Median Income for your situation, you will have to go a little further into the Test to see if you are excluded from Chapter 7.

Please note that the Bankruptcy Code does give the Court the power to separately exclude you from Chapter 7 if it believes that your case was filed in “bad faith” for other reasons. We will look at all of your circumstances, not just the Means Test, and tell you if there is any risk of dismissal under separate standards associated with your case.

Determine Your “projected Disposable Income”

If your income is above the Median Income level for your household size and type, you will be subjected to the next part of the Means Test—a complex formula that is based in part on hypothetical living expenses. But the formula is also based on some of your actual living expenses. To some people, this makes the test seem arbitrary and unfair.

If your income is high enough to be subjected to the “Projected Disposable Income” portion of the test, then we will apply your allowed actual expenses and the hypothetical expenses that we are required to use. The Means Test uses certain expense standards for these expenses that are also used by the IRS to determine the size of monthly payments that it will collect from delinquent tax payers. To see this in detail, go to the U.S. Department of Justice website to find the national and local expense standards that apply in your case.

Is Your Disposable Income Too High For Chapter 7?

After this calculation of your “projected disposable income”, if you have “excess income” on a monthly basis, then the Means Test looks at the amount of the excess to determine if there is enough excess to justify a payment plan to creditors. The calculations require that we take your calculated excess monthly income and multiply that number by 60 (since a payment plan in Chapter 13 could extend for 60 months). So you end up with a dollar figure that represents your “60-month disposable income.”

If your “60-month disposable income” is LESS THAN $7,475, then you pass the Means Test and you qualify for Chapter 7. If this 60-month amount is GREATER THAN $12,475, then you have failed the Means Test. And if this 60-month amount is BETWEEN $7,475 and $12,475, then you need to do another calculation.

So if you are in between these two excess income amounts, the next step is to compare your excess income amount to your “unsecured debts” (credit cards, open accounts, basically most debts other than your mortgage and car loans which are secured by liens). If the excess income is enough to pay MORE THAN 25% of your unsecured debts, then you fail the Means Test and you won’t qualify for Chapter 7. But if these numbers say that you won’t be able to pay more than 25% of your unsecured debts, you pass!

Do Any “special Circumstances” Relieve You From The Means Test?

Even if you fail the Means Test, it may still be possible for you to file Chapter 7 if you can show “special circumstances.” The Bankruptcy Code defines the term “special circumstances” to be “a serious medical condition or a call to active duty in the Armed Forces, to the extent such special circumstances that justify additional expenses or adjustments of current monthly income for which there is no reasonable alternative.”

This is why we assess the entirety of your circumstances when we do the Means Test for you. If we think a special circumstances exception may apply to your case, the law requires that we present documentation along with a detailed explanation. This explanation and your documentation must demonstrate that your special circumstances will create significant extra expenses or an adjustment of your income that is necessary and reasonable.

Find out if Chapter 7 bankruptcy will work for you in light of your income under the Means Test. Find out about your other options too. Call the Bankruptcy Law Center today to set up a FREE consultation at 1-(800)-551-7922.

See What Our Clients Have To Say

Yelp Review

Roger C.

I reached out to BLC to help assist with a chapter 7 business bankruptcy and they provided excellent guidance, advice, and support through the entire process. In my case an adversarial action was filed by one of the creditors and attorney Ahren Tiller and his staff provided sound ...arguments which prevailed. Couldn’t have found a more experienced and supportive team to represent me in a tricky situation. I would highly recommend them to anyone making the difficult but sometime necessary decision to find financial relief. Read more
Yelp Review

Justin R.

Like many others before and during the pandemic, life happenings caused me to be in a financial situation to warrant bankruptcy. The BLC was super professional all the way through the entire process. Right after I paid for my Bankruptcy, I got sick and had to have surgery and recovery. Then we ...were in full Pandemic mode. They were gracious to delay my filing until I was recovered and ready to file. I could not ask for more. The process was over all quick and painless for a simple Bankruptcy like mine. I feel a weight has been lifted and I can rebuild. Thank you for all your arduous work and patience, Gabriel, Ahren, and their teams are knowledgeable and efficient. Read more
Google Review

Katey Huntley

Responsive, friendly, kind, extremely easy to work with! So knowledgeable and made this entire process painless. Very grateful!

Google Review

Lynn Molina

Gabriel Hanna, Esq and the staff at BLC helped me in a very difficult time. I appreciate all the help and care they gave my case.

Google Review

Linda Cramer

I can’t say enough of how much this bankruptcy law firm helped me with my financial situation. They were all so helpful, efficient and made the difficult time and process as quick and easy as possible. I would recommend them to anyone I know and am glad to give my public recommendation as well. T...hey truly deserve a five star plus rating. Read more
Yelp Review

Andrea N.

I am very happy with my experience with BLC. Bankruptcy is not something anyone wants to go through, however everyone at BLC made my experience pleasant and easy. The process was explained thoroughly and I had an easy time reaching out and connecting with my attorney. Anika Renaud-Kim was my attorney ...and she was nothing short of amazing! She was very patient and generous with her time. Ms. Renaud-Kim definitely made me feel at ease and comfortable through the entire process. Read more
Facebook Review

Lidia Paramore

they did a great job for me, helped me anytime I needed something, my Lawyer Gabriel Hanna is the best, gave lots of confidence all the time..thanks BLC I will.always recommend you, I’m very grateful for your service!!!

Yelp Review

Rachael C.

When searching for information I had called a few different firms and received consults. BLC was the only one who didn’t shy away and provided answers and information during the consult. Once I agreed to move forward, they were supportive, informative, and eased my anxiety through the whole process.... I can’t recommend them enough. Read more
Google Review

Emily Martinez

AmazingI had many questions and uncertainties and the carefully explained it all and made it easy to understand. They facilitated a fast and easy process making this scary difficult thing simple

Ready To Eliminate Your Debt?

Bankruptcy is still the best option. Other debt plans make promises, but only bankruptcy delivers.

FREE CASE EVALUATION 

Logo

SAN DIEGO OFFICE

1230 Columbia St. #1100 San Diego, CA 92101

LOS ANGELES OFFICE

11500 Olympic Blvd., 4th Floor Los Angeles, CA 90064

VISTA OFFICE

380 South Melrose Drive #308 Vista, CA 92081
© 2023 Bankruptcy Attorneys. All Right Reserved.

Legal Disclaimer: The Bankruptcy Law Center is a California Licensed law firm with attorneys licensed in the state of CA, NY. Attorney Ahren Tiller is responsible for this advertisement. Bankruptcy Law Center’s principal office is located at 1230 Columbia st. Suite 850 San Diego, CA 92101. Prior results listed on this site do not depict or in any way infer a prediction or outcome.We are a debt relief agency proudly providing options to people with financial problems. View our Privacy Policy

© 2023 All Rights Reserved.