California Means Test
Do You Qualify for Chapter 7?
In order to file a Chapter 7 bankruptcy in the state of California, you must pass the California Means Test. This test only targets “higher income” filers, so if your income is below the California median for your household size, you are exempt from the test and may proceed with your Chapter 7 filing. If your income is higher than the California median, you must complete the means test calculation to determine if you are able to pay back a portion of your unsecured debts through a Chapter 13 filing.
The California Means Test was devised to limit the California Chapter 7 bankruptcy filings to only those who can't pay their debts. It does this by setting limits of eligibility based on average monthly "disposable income." If your current monthly income, averaged over the last six months, is less than the California median income for a household of your size, you are presumed to pass the means test and may proceed with your Chapter 7 filing. So, start by comparing your current monthly income multiplied by 12 to the median annual incomes listed in the table below.
California Median Income* Levels for the California Means Test
|1 Member Household||$47,798.00|
|2 Member Household||$62,009.00|
|3 Member Household||$66,618.00|
|4 Member Household||$75,111.00|
|5 Member Household||$83,211.00|
|6 Member Household||$91,311.00|
|7 Member Household||$99,411.00|
|8 Member Household||$107,511.00|
|9 Member Household||$115,611.00|
|10 Member Household||$123,711.00|
*California Median Income Standards for Means Test for Cases Filed On or After May 1, 2020
If you find that your income is over the median income limit and your income has been declining over the last six months, then you may benefit by waiting a few months to help lower your average-six-month income.
The California Means Test
If your income is over the California median income for a household your size, then you must complete the California Means Test. This involves collecting your monthly income and expense records and determining all your allowed expenses for California. Some of the expenses are based on standardized amounts calculated by the Census Bureau and the Internal Revenue Service. Chris Bush can help you determine the amount of income under the bankruptcy law that you have available to pay your unsecured creditors in a Chapter 13 plan. If this “disposable income”, over the course of the next 60 months, is less than $7,475 then you pass the means test and you may file a Chapter 7 bankruptcy. If it is over $12,475 then you fail the means test and don't have the option of filing Chapter 7. If your disposable income falls between $7,475 and $12,475 then you must do further calculations to determine if you have the option of filing a Chapter 7 case.