Chapter 7 Means Test Explained

What is the Means Test?

Bankruptcy PetitionIn order for an individual to file for Chapter 7 bankruptcy protection in Ocean County, New Jersey, that individual must qualify under what’s called the Chapter 7 “means test”. The purpose behind the means test is to prevent individuals with high income from discharging their debt by way of a Chapter 7 proceeding. Chapter 7 bankruptcies are designed to assist individuals who have no available income or other ability to repay their debt. In other words, in order to qualify for a Chapter 7 bankruptcy, you must have income below a certain level and have a specific debt-to-income ratio. A person’s qualifications for Chapter 7 bankruptcy will be determined by the court by running a calculation commonly known as the means test. Typically, a debtor will pass the means test if his or her income falls below the average income in the state of New Jersey. Pursuant to the U.S. Bankruptcy Code, the average monthly income earned six months prior to the filing of the bankruptcy is utilized to determine what the debtor’s actual income is. Once the debtor has met the criteria as set forth in the means test, he or she will then be eligible for a Chapter 7 filing.

Those with Higher Income Still May Qualify for Chapter 7

In some circumstances, even in the event that a debtor earns more than New Jersey’s average median income, he or she may still have the ability to qualify for Chapter 7 bankruptcy. However, the individual must demonstrate that they do not have enough disposable income to pay their debts. Oftentimes, individuals seeking to claim bankruptcy in Ocean County, New Jersey have a considerable amount of consumer debt, such as credit cards, medical bills and bills associated with the home. In the state of New Jersey, the following income limits have recently been established for those filing for bankruptcy after March 1, 2013 as it relates to the means test:

Household Size Income Limit
4 person household $103,786
3 person household $85,016
2 person household $69,697
Single person household $61,146

Call an Experienced Ocean County Bankruptcy Attorney

Ocean County bankruptcy attorneys at Villani & DeLuca can assist you in determining whether or not a Chapter 7 means test will impact your contemplated bankruptcy filing. Call attorney Robert H. Johnson at the law offices of Villani & DeLuca for a free confidential bankruptcy consultation today. Mr. Johnson has represented numerous residents of Ocean County in assisting them in discharging their substantial debts, whether it be medical bills or personal credit card debts. Call (732) 965-3390 today!