Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act back in 2005, which saw significant changes to the bankruptcy law. One inclusion in the Act is the requirement that all Chapter 7 applicants pass the bankruptcy Means Test. The Means Test is meant to reserve Chapter 7 bankruptcy protection for those who truly need it.
Generally, the Means Test requires applicants to earn an income lower than the specified amount to be eligible to file for Chapter 7 bankruptcy. Here’s how the bankruptcy Means Test works to determine eligibility in Florida.
The first step of the Bankruptcy Means Test in Florida is a simple check and comparison of incomes. An individual passes this first part of the Means Test if their average income over the most recent six months is below the Florida median income for a household size the same as theirs. Individuals whose income is above the Florida median income will need to do other calculations to determine their eligibility for Chapter 7 bankruptcy. Individuals can compare their incomes against those in the table below:
|Household Size||Monthly Income||Annual Income|
The second part of the Means Test involves calculating an individual’s monthly disposable income. It is determined by subtracting all allowable expenses from the gross monthly income. The monthly disposable income is then projected for five years by multiplying the figure obtained by 60. If the projected disposable income is below $7,025, then an individual passes the Means Test. However, if this figure is above $11,725, one is deemed to have failed the Means Test.
What does that mean for individuals whose projected disposable income is between $7,025 and $11,725? Such individuals will pass the Means Test provided their disposable income is less than 25% of the unsecured debt owed.
Normally, individuals with higher disposable incomes are less likely to pass the Means Test in Florida. However, they may still qualify to file for Chapter 7 bankruptcy if they successfully prove that some special circumstances necessitate filing for Chapter 7. Individuals may be exempted from the Means Test if:
- Their debts are not particularly consumer debts
- They are veterans with a disability and incurred their debt during active duty or when performing a homeland defense activity.