Heart of the Home Dining

With many people recently losing their jobs say that they wanted to file for Chapter 7, but couldn’t because their income was too high. In most cases,  however, a high income–even one significantly over your state’s median income–doesn’t automatically disqualify you from chapter 7 bankruptcy. The answer lies in the bankruptcy code and the means test.

The Bankruptcy Code requires individuals to complete a “Means Test” when they file Chapter 7, 11, 12 or 13. The stated purpose of the Means Test is to make sure that people who can afford to repay some of their debt to do so by having them file for Chapter 11 or 13 rather than Chapter 7.

The first requirement of the Means Test is to compute your household’s “Current Monthly Income,” or CMI. The CMI is neither current, nor monthly, not income. This is because it is an average of the last six months of only certain types of income. Social security, for example, isn’t included. Unemployment probably isn’t. So if you lost your job 3 months ago, the income you used to make is still part of your CMI. And if you start a new job on the first of the month and file on the 30th, that income is not part of your CMI.