Arkansas Attorney Blog

Chapter 7 Bankruptcy Means Test - Arkansas

  

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If I pass the chapter 7 “Means Test” do I automatically qualify for chapter 7 bankruptcy?

The question often comes up at a first meeting with a new client as to whether they will be able to file a chapter 7 bankruptcy so long as they can pass the so called “means test” of bankruptcy. Generally, if you do not make too much money (this depends on your family size and county of filing) you will be considered “below the median” and should not have too much issue in getting Chapter 7 relief so if you are in that situation, this article does not pertain to you; however, what about the case of a “above the median” debtor who is still able to pass the means test, do they automatically qualify?

The Courts have consistently held that passing the Means test is just one of the qualifiers for Chapter 7 eligibility. The Code also allows the Trustee’s and other parties in interest to examine the debtors schedules to determine whether allowing that debtor to file chapter 7 would constitute “substantial abuse” of the law. Essentially, the Trustee’s will look at an individual debtor’s budget as well as external circumstances: Is the debtor going to start a new job making a lot more money in one month? Does the debtor stand to inherit money? If it looks like the debtor is spending too much on a home or expensive cars, then the Trustee may also take that into consideration as to whether the debtor filing chapter 7 is abusive.

If the Court finds that the debtor’s filing is abusive, the debtor’s case could be dismissed or the debtor could be asked to convert his case to a chapter 13 and pay back some of his creditors with monthly payment.