The first part of the test is whether you household income is at or below the median income your geographical area based on number of persons in your household.
Just because your income is more than the median does not necessarily mean that you will not qualify for Chapter 7 and that you will have to file a Chapter 13 Bankruptcy instead. The second part of the means test takes a look at your monthly expenses vs. your income. If you have very little disposable income, after paying your necessary expenses (food, shelter, clothing, transportation, heath insurance), then you may very well still qualify even if your income is above the median income.
The third part of the means test measures your expenses against the IRS standards to measure the reasonableness of your expenses. Generally the IRS standard expenses are less than most people’s expenses, but there isn’t too much of a disparity.
What does this all mean? Well I can best explain this with an example.
example: Lets say the median income for one individual is 38K per year and you make 70K; you have close to 300K in debt some secured and some unsecured; your payroll deductions are more than half of your income per pay period; and once you pay your necessary expenses you have virtually no money. Well in this scenario you would qualify for a chapter 7 because you will pass the means test and you would not qualify for a chapter 13 because you have no disposable income available to pay into a plan payment, particularly if you are operating at negative at the end of the month.
A qualified Bankruptcy Attorney can let you know whether you qualify for Chapter 7. In North Carolina call Maxwell Law Firm, PLLC 704-780-1100. In California contact the Law Offices of Chirnese L Liverpool at 818-714-2200.