What is Means Testing?
At the same as the petition is filed, a report to the Court of your current monthly income is required (defined as the average of your income from all sources in the last 6 months) In the event that your income for your household size (household means everyone in your household whether you can claim them on your tax return or not) is less than the median income for Texas, then the analysis stops there and you are eligible for a chapter 7 discharge.
Median income
Median income as of April 2024
Median income in Texas for a household size (number of people in household) of
- 1 is $61460
- 2 is $79870
- 3 is $89842
- 4 is $108866
- 5 or more you add $9900 per additional person to the income on 4.
If your income exceeds the median income then we will provide a more detailed “Means Testing” document (budget). If there is less than roughly $150 left over after that analysis then you are still eligible for a chapter 7 discharge. The “Means Testing” is the government defined test and as such is not necessarily logical or simple. It is in theory an attempt to weed out people that can pay back their debts but does not operate in the way it was intended.
If your income(as defined by Congress) less the means testing comes up with more than roughly $150 per month, you may still show special circumstances that would entitle you to chapter 7 relief. Excessive energy or gasoline costs would be an example along with special needs children or health issues. Also divorce, unemployment, cessation of second job or cessation of overtime pay would be an example of special circumstance. I have had a great deal of success with special circumstance claims. The Courts do not want to deny deserving people their fresh start.
Proof of your income for the past 2 months is required to be filed with the petition. That can consist of bank statements, unemployment records, payroll stubs from the prior 2 months. If you are a small business we need to have an accurate accounting of what your income and expenses are.(A limited profit and loss even if in journal format is fine)
In the event that you do not fall under any of the exceptions to the rule and you have some money left over each month, but not enough to pay everybody back, then a chapter 13 bankruptcy would be a beneficial alternative. Chapter 13 is explained elsewhere in my site but in general it is helpful also if you are behind on house, car, IRS or business debts.
To contact me by email, please use this address: hollyguelich@sbcglobal.net.