Means Test

The liquidation process under Chapter 7 bankruptcy is the most common form of bankruptcy in the State of Texas. The 2005 Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) amendments brought significant changes to Chapter 7 bankruptcy. Most notably, the 2005 changes subjecting most debtors with an income above the debtor's state census median income to a 60-month disposable income based test known as the "means test."

The means test in a bankruptcy case determines who can file for debt forgiveness through Chapter 7 bankruptcy. The means test takes into account the petitioner's income, expenses, and family size to determine whether the individual has enough disposable income to repay your debts.

In essence, the "means test" helps the courts figure out whether the debtor's disposable monthly income is higher than a specified floor amount or portion of their debts. If the requirements of the test are not met, the debtor must rebut the presumptions by showing "special circumstances." For example, if the debtor has more than $182.50 in disposable monthly income, then the debtor faces a presumption of abuse.

If the debtor has an income below the median income in Texas, then the debtor is not subject to the means test. Also, special circumstances allow the debtor to adjust income by documenting additional expenses or loss of income in special and significant situations. Those circumstances could include being called to active military service or being disabled by a medical condition.

Attorneys for the Chapter 7 Means Test in Dallas, TX

A bankruptcy attorney in Dallas, TX, can help you understand how the means test might impact your Chapter 7 case. An attorney can also help you complete the various forms including Bankruptcy Form 122, 122A and the other Forms required under Chapter 7. 

The attorneys at Littlefield Law Firm can help you determine whether you qualify for Chapter 7, how the means test works, what happens if you fail the means test. Contact our experienced bankruptcy attorneys to discuss your case.

Call (972) 812-0900 today.

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Overview of Bankruptcy Means Test in Texas

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Types of Means Test Forms in Dallas

Means testing commonly involves one of three kinds of forms. Form 122A-1, or the Chapter 7 Statement of Your Current Monthly Income, a form that must be completed by every individual filing for Chapter 7 bankruptcy. 

Form 122A-1 determines a debtor's current monthly income, compares it to the median family income for his or her state, and concludes whether there is a presumption of abuse. Debtors are free to file for Chapter 7 when there is no such presumption, but they will have to fill out one of two other forms when there is a presumption of abuse.

The Statement of Exemption from Presumption of Abuse Under §707(b)(2), or Form 122A-1 Supp, determines whether a debtor is exempt from the presumption of abuse because he or she either has primarily consumer debts or qualifies for a military service provision. The first part of Form 122A-1 Supp is dedicated to determining which kinds of debts an individual has while the second part provides military provisions for people with certain military backgrounds. 

A Chapter 7 Means Test Calculation form, or Form 122A-2, needs to be filled out by any person whose Form 122A-1 shows an income above his or her state's median income level. The form involves several calculations relating to the debtor’s current income.

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Parts of Means Test Forms in Dallas-Fort Worth

Form 122A-1 has three parts, with the first part focusing on calculating a debtor's current monthly income. The calculation accounts for several factors, including marital and filing status, unemployment compensation, and pension or retirement income, among many others.

The second part compares the debtor's current monthly income to the median family income that applies to him or her, based on the number of people in his or her household and the state he or she lives in. The final part of the form is the debtor's signature declaring under penalty of perjury that the information contained is true and correct. 

Form 122A-1 Supp consists of only two parts. One part concerns whether a debtor's debts are primarily consumer debts, and the other part determines whether military provisions apply to the debtor.

Form 122A-2 has five parts, making it the longest of the three forms. In the first part of this form, the debtor determines his or her adjusted income before calculating applicable deductions in the second part. The second part contains more than six pages of possible deductions, and the third part determines whether there is a presumption of abuse.

Part 4 allows a debtor to give details about special circumstances that justify additional expenses or adjustments of current monthly income for which there is no reasonable alternative. The final part of Form 122A-2 is the debtor's signature declaring under penalty of perjury that the information is true and correct.

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Forms for the Chapter 7 Means Test

When a person files for bankruptcy relief in a chapter 7 case, he or she must complete certain forms including:

  • A Statement of Your Current Monthly Income (Official Form 122A-1);
  • A Statement of Exemption from Presumption of Abuse under § 707(b)(2) (Official Form 122A-1Supp); or
  • Chapter 7 Means Test Calculation (the Official Form 122A-2) if you are not exempt and your income ia above the median income.

Additionally, when a person files for bankruptcy relief in a Chapter 13 case, he or she must complete the following forms:

  • A Statement of Your Monthly Income and Calculation of Commitment Period (the Official Form 122C-1) if your income is above the median income; and
  • A Chapter 13 Calculation of Disposable Income (the Official Form 122C-2).

On the forms, the debtor's income and expense information are entered. Calculations are made based on the information entered. Although some of the information comes from the debtor's personal records, other information comes from the Census Bureau and the Internal Revenue Service (IRS).

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Additional Resources

USTP Position on Legal Issues Arising Under The Chapter 7 Means Test - Visit the website of the Department of Justice to learn more from the Census Bureau about IRS data and administrative expenses multipliers. Find a line-by-line summary of Form 22A. Use the summary from the United States Trustee Program (USTP) to find recurring disposable income issues that might arise in chapter 7 cases under the BAPCPA provisions of 11 U.S.C. § 707(b). The United States Trustees should, absent unusual circumstances, maintain these positions when interpreting section 707(b) unless the circuit court has decided an issue to the contrary.

Chapter 7 Means Test Calculation - Visit the website of the United States Courts to find the Chapter 7 Means Test Calculation in form number B 122A-2 that became effective on April 1, 2016. This form is derived from official form 22A-2. Find the chapter 7 statement of your current monthly income. This official bankruptcy form was approved by the judicial conference and must be used under bankruptcy rule 9009. Find the committee notes and form instructions.

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Find a Means Test Attorney in Miami, FL

If you are preparing to file for Chapter 7 bankruptcy in North Texas, it is in your best interest to seek legal representation for help with the means test. Littlefield Law Firm will work to ensure that you achieve the most desirable possible resolution to your case. 

Our Dallas bankruptcy lawyers represent clients in communities all over Kaufman County, Dallas County, Rockwall County, and Collin County. You can have our attorneys provide a complete evaluation of your case as soon as you call (972) 812-0900 or fill out an online contact form to set up a free, no-obligation consultation.

This article was last updated on Tuesday, February 13, 2018.

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Linda Littlefield