When contemplating the decision of filing for personal bankruptcy, one of the most important elements to consider is which chapter you choose to file under. Chapter 7 bankruptcy is by far the most common path sought by people in North Carolin (and throughout the rest of the U.S.) due to the benefit it offers of allowing the discharge of certain debts. 

Yet as many of our past clients here at Gillespie & Murphy, P.A. can attest to, not everyone may qualify to file under Chapter 7. To know for sure, you need to know the parameters set forth in the Chapter 7 means test. 

What is the means test?

The Chapter 7 means test basically establishes the presumption that you may or may not be attempting to abuse the privileges afforded by Chapter 7 bankruptcy protection. It evaluates your income to establish your ability to potential repay your debts. According to the Administrative Office of the U.S. Courts, the first step in the means test is to compare your current monthly income to that of your particular demographic in the state. If it is less than the average amount, then you automatically qualify to file under Chapter 7. If not, then you pass on to the next phase. 

Reviewing your aggregate monthly income

This phase involves projecting out your aggregate monthly income (minus certain allowable expenses) over a period of five years. If that amount is more than either 25% of your non-priority unsecured debt (provided that amount is at least $7,700) or $12,850, then you fail to qualify to file under Chapter 7. 

Should you fail the means test, then the court will likely ask that you convert your petition into a wage-earner bankruptcy (Chapter 13). You can find more information on personal bankruptcy protection throughout our site.