Is It Possible to Qualify Under the Chapter 7 Means Test Even if You Have a High Income?

People who struggle with debt despite earning a higher-than-average income sometimes are told that they cannot file for Chapter 7 bankruptcy because they make too much. Indeed, the means test is used in Chapter7 proceedings to ensure that debt discharge only is granted to those who really need that type of relief. While the first step of the means test evaluates a filer’s income against the median in their state, many above-median income households still qualify once the calculation accounts for allowed expenses, debt payments and special circumstances. There are also instances where a debtor is permitted to bypass the means test completely. 

If your gross income over the six full calendar months before filing is below the Georgia median for a household of your size, you complete Form 122A-2 to determine if your deductions enable you to obtain a Chapter 7 bankruptcy. The calculation in the form subtracts standardized IRS allowances and certain actual expenses to determine if enough disposable income exists to pay back creditors.

Some of the specific deductions that can used include the following:

• Tax obligations, including mandatory payroll deductions
• Health insurance premiums
• Food costs
• Rent or mortgage payments
• Expenses for childcare or the care of an elderly or disabled loved one
• Mortgage and car loan obligations

Preparing for the means test calculation requires preparation, including the collection of records documenting income and requested deductions. Timing counts as well. If your income was unusually high at some point during the previous six months, it might be necessary to wait before filing. 

Working with an experienced attorney is the best way to evaluate if you’re a good candidate for a Chapter 7 bankruptcy. They can go over your income and the expenses above, as well as special circumstances that might affect the means test, such as unusually high medical costs or the fact that most of your debt is business-related. Disabled veterans and members of the National Guard might be obtain a debt discharge without having to qualify under the means test. 

Jeff Field & Associates guides Georgia clients through the means test and the rest of the Chapter 7 bankruptcy process. Please call 404-381-1278 or contact us online to schedule a consultation if you are unable to meet your current debt obligations. Our offices are in Douglasville, Gainesville, Bogart, Lawrenceville, Marietta and Decatur.