How to Pass the Chapter 7 Means Test with Above Median Income

If you’re considering filing for Chapter 7 bankruptcy but your income is above the median income for your state, you might think that you’re not eligible for this type of bankruptcy. However, that’s not always the case. In fact, there are ways to pass the Chapter 7 means test even if your income is above the median income.

The first thing you should know is that the Chapter 7 means test is designed to determine whether you have enough disposable income to pay off your unsecured debts. If your income is above the median income for your state, you’ll have to take the means test to determine whether you can file for Chapter 7 bankruptcy.

To pass the means test, you’ll need to show that your disposable income is below a certain threshold. This threshold is determined by deducting certain allowed expenses from your income. If your disposable income is below the threshold, you’ll pass the means test and be eligible for Chapter 7 bankruptcy.

So, what are these allowed expenses? They include things like rent or mortgage payments, utilities, food, clothing, transportation, and other necessary expenses. These expenses are based on national and local standards, and you’ll need to provide documentation to support your expenses.

If you have a lot of expenses, you might be able to pass the means test even if your income is above the median income for your state. For example, if you have a high mortgage payment, that will reduce your disposable income and make it easier to pass the means test.

Another way to pass the means test is to use what’s called the “marital adjustment” deduction. This deduction allows you to deduct a certain amount of your spouse’s income even if they’re not filing for bankruptcy with you. This can be a powerful tool for couples where only one spouse has a lot of debt.

In conclusion, if you’re above the median income for your state, don’t assume that you can’t file for Chapter 7 bankruptcy. With careful planning and documentation of your expenses, you might be able to pass the means test and get the fresh start you need. Contact a bankruptcy attorney to discuss your options and see if Chapter 7 bankruptcy is right for you.