Florida debtors who have decided to file for Chapter 7 bankruptcy proceedings must usually pass a standardized, objective test called the Bankruptcy Means Test. This became the new standard after the the Bankruptcy Protection Act of 2005 was passed by Congress to tighten the criteria for filing consumer bankruptcy.
The monthly income of the debtor is averaged for the last six months and compared to Florida’s median family income. Those debtors whose income is equal to or less than the state median may file for Chapter 7, although this is subject to approval by a trustee. In calculating income, debtors must include all of the following:
— Workers’ Compensation
— Spousal support and child support
— Unemployment Compensation
— Income from real and rental properties
— Retirement pension income
— Gross income from farming interest, professions and businesses
— Disability insurance from the state
However, some income is excluded from the means test and includes revenue from public assistance, tax refunds, Supplemental Security Income, Social Security Disability Insurance and Social Security retirement benefits.
Those debtors making more than the Florida median income must complete part two of the means test to be eligible for Chapter 7. The debtor will deduct all allowable standardized and actual expenses to determine their eligibility.
Those who fail the means test may not necessarily be disqualified if they can prove that certain “special circumstances” exist. These circumstances can include abnormally high rent, a critical health condition or recent unemployment. Documentation is necessary to support these claims.
Disabled veterans who incurred the debts they are seeking to discharge while serving on active duty or in activities related to homeland defense are excluded from the means test if their disability rating is not less than 30 percent. At least 51 percent of the debt must have been accrued during their service.
To make sure that you are truly eligible, seeking advice from a qualified legal professional is always wise.
Source: FindLaw, “The Bankruptcy Means Test” Oct. 09, 2014