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Exemptions to the Means Test


Any individual (or married couple, in a joint filing) who wants to file for Chapter 7 bankruptcy will typically need to plan to take and pass the “means test.” The idea is that, in order to be eligible for a liquidation bankruptcy, you will need to show that you have sufficiently limited income and assets such that a liquidation bankruptcy and debt discharge would not be abusive. Passing the means test is essentially a way of showing that there is no presumption of abuse — in other words, by passing the means test, you are showing that you do not have an excessive amount of disposable income such that it would be abusive to allow you to have debts discharged.

While most people will need to show that they can pass the means test, there are some important exceptions to know about and to consider. Our West Palm Beach bankruptcy lawyers can tell you more.

Businesses Do Not Have to Pass the Means Test

 Any individual or entity with “primarily business debts” (also known as non-consumer debts) does not have to take and pass the means test. “Primarily” usually means more than 50 percent. The means test is only for individuals (or married couples) with primarily consumer debts. Accordingly, whether a business entity such as a partnership, limited liability company (LLC), or corporation wants to file for bankruptcy, or a person with primarily business debts wants to file, then there is no need to take and pass the means test. This is not an eligibility requirement for filers with primarily business debts.

In this type of situation, your income and assets will not affect your ability to file for Chapter 7 bankruptcy.

Debtors with a Below-the-Median Income Do Not Need to Take the Means Test

 Individual debtors with an income below the median for their family size with primarily consumer debts do not need to take the means test. To be clear, your income will impact your eligibility for Chapter 7 bankruptcy, but you will not need to complete Form 122A-2, which is the Chapter 7 Means Test Calculation.

Certain Veterans and Members of the Military Are Not Required to Pass the Means Test 

If you are a disabled veteran (with a disability rating of 30 percent or more) and you incurred your debts while you were on active duty, you do not need to pass the means test and your income will not affect your eligibility to file for Chapter 7 bankruptcy.

Likewise, current active-duty members of the military do not have to take the means test if they have been on active duty for at least 90 days, and income will not impact eligibility for a Chapter 7 filing. However, there is a time limit to this specific exception, so you should speak with a lawyer about your particular circumstances.

Contact Our West Palm Beach Bankruptcy Attorneys Today 

Whether you have questions about exceptions to the means test or you need assistance with your Chapter 7 bankruptcy filing, an experienced West Palm Beach bankruptcy lawyer at Kelley Kaplan & Eller, PLLC is here to assist you. Contact us today to begin working on your bankruptcy case.




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