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The Chapter 7 means test explained

Struggles with debt is a more common problem in Hayward than many may think. It may be relatively easy to fall into a situation (either through the loss of a job, a severe injury or illness, or other scenarios both in and out of one's control) where debt difficulties become very real; conversely, it can often be next to impossible for one to work their way out of such a predicament on their own. Personal bankruptcy may ultimately be one's best option at returning to a sound financial state. 

Chapter 7 is often the preferred method of personal bankruptcy due to the opportunity it presents to have debts discharged. Indeed, according to the American Bankruptcy Institute, 63.72 percent of all personal bankruptcy filings in American during the second fiscal quarter of 2018 were Chapter 7 cases. However, just because one may want to seek a Chapter 7 bankruptcy does not mean that they are qualified to. 

Per the website for the Administrative Office for the U.S. Courts, those hoping to file under Chapter 7 must first pass a means test. The first step of this test is to compare one's income with that of their same demographic in their state. If it is lower, then they qualify to seek a Chapter 7 bankruptcy. If it is not, then their average income (minus certain allowable deductions) is aggregated out over a five year span. If that figure is greater than either $12,850 or 25 percent of one's nonpriority unsecured debt (provided that debt amount is more than $7,700), then abuse of bankruptcy privileges is presumed and they do not qualify. 

In such a case, one can still seek special permission to file for a Chapter 7 bankruptcy. Typically, however, the court will recommend re-filing under Chapter 13. 

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