Chapter 7 Means Test Calculator

The Chapter 7 Means Test Calculator below highlights whether you appear to qualify for a Chapter 7 bankruptcy in your state. Because the calculator is an estimate, your actual results may vary (to have a more precise estimate, use our calculator here). The precise means test estimate uses the US bankruptcy form, "Chapter 7 Statement of Your Current Monthly Income".

A Chapter 7 bankruptcy provides liquidation. In other words, this means that the sale of nonexempt property and the distribution of the funds to the creditors owed is guaranteed. To qualify for a Chapter 7, you must meet the income and household number guidelines per your own state’s guidelines via the means testing. Of course, there are certain exemptions where you may still qualify for a Chapter 7 even though your income is above the median. However, these are on a case by case basis.

The Chapter 7 Means Test Calculator follows the protocol used by official US Bankruptcy Forms. We use the Chapter 7 Means Test Calculation (Form Number: B 122A-2) for our precise Chapter 7 calculation, and we use a shorter estimate for our calculation above.  

The means test calculation is based on the income guidelines provided by the state, the income that you and/or a spouse makes, and the number of people in your household. We use the most recent Census Bureau Median Family Income as of November 1, 2019 provided by the United States Department of Justice. Our calculator is able to automatically pull your median income based on the zip code you provided.  

Now that we understand how we qualify for a Chapter 7, let's get into the details of how a Chapter 7 works.

Chapter 7 bankruptcy is faster form of debt relief. Unlike filing for Chapter 13, it does not involve submitting a repayment plan, but instead involves the gathering and selling of non exempt assets in order to pay creditors, through a liquidation process. However, the debtor is allowed to keep their extemp assets in accordance with the Bankruptcy Code. Typically however going through with a Chapter 7 bankruptcy guarantees a loss in property.

Individuals, partnerships, corporations, and business entities are all eligible to qualify for Chapter 7 bankruptcy.  

However there are two specific cases in which individuals cannot file for any form of bankruptcy. The first being that if in the 180 days prior to filing, their bankruptcy petition was rejected due to the debtor’s failure to comply in a variety of ways. The other case, is if in the 180 days prior to filing the debtor has not sought approved credit counseling.  

Additionally, one of the purposes of bankruptcy is to allow individual debtors to have a new start by discharging their debts and removing the responsibility of those debts. Thus with Chapter 7 specifically, this removal of debts can only be given to individuals not corporations or business entities. However, this individual’s right of having debts discharged is not a guarantee, as it is not possible with certain types of debt, such as those related to property.  

To begin the process of filing for Chapter 7 bankruptcy, the first step is for the debtor to file a petition with the bankruptcy court nearest to them or their place of business. They must also submit a variety of personal finance documents to the court, such as statements in regards to financial affairs and unexpired leases. Additionally, a copy of their tax return from the recent tax year and any returns during the duration of the case are to be presented to the assigned case trustee.  

For individuals specifically, there are additional documents to file. This includes a certificate of credit counseling, a copy of any debt repayment plan from credit counseling, and proof of employer payment from 60 days prior to filing (the complete list of documents required here).  

Before filing, a variety of fees for the filing process must be paid to the bankruptcy court. If needed, individuals debtors can pay these in up to four installments, though there are exceptions to that limit.  

In order to have completed the Official Bankruptcy Forms, debtors must provide the following information:  

• A list of all creditors and the amount and nature of their claims;
• The source, amount, and frequency of the debtor's income;
• A list of all of the debtor's property; and
• A detailed list of the debtor's monthly living expenses, i.e., food, clothing, shelter, utilities, taxes, transportation, medicine, etc.

Married individuals, regardless of who is the one filing, must include this information for their spouse as well.This is only done so that the bankruptcy court can properly evaluate the financial situation of the household. You may submit a schedule of properties from which you are exempt; these corresponding properties are determined and protected by federal or your state bankruptcy laws. To know what is exempt in your state, it is best to contact a bankruptcy attorney.  

When filing for Chapter 7, there are a few things to remember. The action of filing will automatically place a stop on most creditors and collection agencies. When someone files, a bankruptcy clerk will give notice to all creditors provided by the debtor of their filing. Additionally, between 21 and 40 days after filing, a meeting will be held by the case trustee between the debtor who will be under oath and the creditor. During this meeting the case trustee and creditors will ask questions, in which cooperation is key. Things such as financial documents may be requested. One of the goals of the meeting is to ensure that the debtor is fully aware of the process and results of Chapter 7 as well as the alternatives. The Bankruptcy Code does allow for Chapter 7 bankruptcy cases to be converted to Chapter 11, 12, 13 as long as they are still eligible.  

A Chapter 7 discharge only applies to individuals filing for Chapter 7. When granted Chapter 7 discharge, responsibility for your debts are removed and creditors can no longer collect take action towards your debt. According to the United States Courts, apart from the exceptions, individuals receive this discharge 99 percent of the time. This usually occurs within 60 to 90 days after the first meeting set with creditors.  

Concerning the probability of being denied a discharge, the chances are few and far between. However, the cases for such an occurrence are all listed here. These reasons include failing to keep adequate financial records or failing to follow an order from the bankruptcy court.  

In some cases, even after a discharge is given, creditors may come after underlying debt by taking away property. If the debtor wishes to prevent this, they must “reaffirm” their debt. In other words, they have to make an agreement to pay all or some of the debts owed to the creditor that would have otherwise been waived through the process of bankruptcy. As long as the debtor continues to pay the debt, they cannot take away property. Reaffirming must take place before the discharge is granted by submitting a written agreement to the court. Within this agreement, specific disclosures are required to be filed, including how much debt is being reaffirmed as well as proof that the debtor’s current income is sufficient to pay the debt. If this is not the case, the court may not approve the reaffirmation agreement. However, if the debtor is not represented by an attorney, the bankruptcy judge is required to approve the agreement. With an attorney, they will be required to confirm that reaffirmation will not bring any harm to the debtor. Most importantly, the debtor must be paying the debts voluntarily in any case.  

Although most debts are discharged through Chapter 7, there are a few situations in which this is not possible. These cases include debts from educational loans and personal injury from driving under the influence. Certain debts are guaranteed to be discharged unless a creditor files to have the debts made dischargeable.  

The court reserves the right to remove a discharge by request of trustee, creditor, or a federal trustee in defined instances, such as the discharge having been obtained through fraud.  

While a Chapter 7 is one of the more severe bankruptcies, there are many pros to consider when deciding whether this debt relief solution is best for you. Here are the pros:

• You may receive debt relief within 90 days from filing.
• It is often the most inexpensive options with all in costs ranging between $1000 - $2000.
• You get legal protection against creditors, so you will not be sued.
• There are no taxes on unpaid debt.
• A Chapter 7 can eliminate most of your unsecured debt.
• Due to there being a high success rate with Chapter 7, those who file often follow through until completion. The success rate drops with a Chapter 13 bankruptcy and debt settlement.  

As with any debt relief option, Chapter 7 is accompanied with cons to consider before filing.

• There is a high damage to the creditor report. A Chapter 7 bankruptcy will be on your credit report for 10 years.
• As your credit score will be greatly damaged, it will make it more difficult to get future credit opportunities. 
• There may be a potentially low availability to credit after filing.
• There is no property protection above the state exemption amount, so some of your assets may be liquidated to pay off creditors.
• A Chapter 7 will be on your public record.
• As seen above, you must qualify for a Chapter 7 bankruptcy unlike a Chapter 13 bankruptcy.  

There are a few main alternatives to Chapter 7 Bankruptcy. Each debt relief alternative has its own set of pros and cons. Here are the main alternatives to Chapter 7 bankruptcy. 

• Debt Management
• Debt Settlement
• Chapter 13 Bankruptcy 

As with every debt relief action, there is a severity associated with that action. Below is our estimate of how Chapter 7 compares to other debt consolidation and debt relief options.

Not necessarily. For example, you could qualify for a Chapter 7 bankruptcy, but only have $100 in total debt. Meaning that such a drastic solution would be too much for such a low debt amount.

On the other hand, let’s say you have $300,000 in unsecured debt and recently lost your job, so you have no income. A Chapter 7 bankruptcy in this situation may make more sense, but it always depends on each situation and each individual.  

We like to understand your goals for debt relief and your full financial picture before recommending to speak with a bankruptcy attorney. To help you, please provide a few pieces of information and we will reach out to you.

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