Can You File Chapter 7 If You Have A Surplus Of Income Per Month?

Filing for Chapter 7 bankruptcy when you have a surplus of income over expenses can be challenging, as Chapter 7 is primarily designed for individuals who do not have the means to pay off their debts. The key determinant in whether you can file for Chapter 7 when you have a surplus income is the means test, which assesses your financial ability to repay creditors.

The Means Test:

1. Income Comparison: The means test first compares your average monthly income for the six months before filing to the median income for a household of your size in your state. If your income is below the median, you can typically file for Chapter 7.
2. Disposable Income Evaluation: If your income is above the median, the means test will deduct allowed expenses (based on IRS standards and actual expenses) from your income to determine your disposable income. If the disposable income is too high, you might not qualify for Chapter 7.

Surplus Income:

• If you have a significant surplus of income over expenses, it suggests that you might have the means to pay back some or all of your debts through a Chapter 13 bankruptcy repayment plan.
• Chapter 7 is intended for debtors who lack sufficient disposable income to repay debts. If the means test shows you have enough income to fund a Chapter 13 plan, you may be steered toward filing for Chapter 13 instead.

Exceptions and Considerations:

• Special Circumstances: If you have special circumstances that significantly reduce your disposable income or increase your expenses (such as serious medical conditions), you might be able to make a case for Chapter 7, even with a higher income.
• Non-Consumer Debts: If the majority of your debts are non-consumer debts (e.g., business debts), you may not be subject to the means test and could potentially file for Chapter 7.

Legal Advice:

• Given the complexities of bankruptcy law and the means test, it’s advisable to consult with a bankruptcy attorney who can evaluate your financial situation, guide you through the means test, and help determine the most appropriate form of bankruptcy for your circumstances.

While having a surplus of income over expenses can make it more challenging to qualify for Chapter 7 bankruptcy, it’s not necessarily disqualifying. The means test and other factors will play a crucial role in determining your eligibility. Consulting with a bankruptcy attorney can provide clarity on your options and help you navigate the filing process.

Bankruptcy Means Test