DETAILS OF THE CHAPTER 7 MEANS TEST

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If your income is higher than the Texas median household income, you must pass the Texas means test before becoming eligible for Chapter 7 bankruptcy. The means test involves your average household income.You determine your average household income by averaging your monthly income over the last six calendar months and then multiply that number by 12.

Average household income accounts for almost all your sources of income, including:

  • Business income
  • Rental income
  • Dividends
  • Pensions
  • Retirement plans
  • Unemployment income

EXEMPTIONS FROM THE MEANS TEST

If your average household income is below the Texas median, you are automatically exempt from the means test. You are also exempt from the means test if you are a disabled veteran and accrued your debt mostly during active duty or homeland defense. If your debts are less than half consumer debts (personal, family, or household purposes), you may also be exempt from the means test. Work with a bankruptcy lawyer to ensure your information correctly follows national and state procedures.

The Texas median annual income standard depends on the size of the household, and include:

  • 1 Member – $41,960
  • 2 Member – $57,121
  • 3 Member – $60,440
  • 4 Member – $77,670

You can calculate your monthly and annual income against the Texas medians with a means calculator online.

WHAT IF I AM ABOVE THE TEXAS MEDIAN AVERAGE HOUSEHOLD INCOME?

If your average income is higher than the Texas median, a means test calculation determines whether you may be able to pay back a portion of your unsecured debts through a Chapter 13 bankruptcy. In order to successfully file for Chapter 7 bankruptcy, your average income must be lower than the Texas median or you must meet one or more of the exemption requirements.

It is important that your income information be accurate and thorough in order for the bankruptcy filing process to go smoothly and correctly. Retaining legal guidance from a Dallas bankruptcy attorney may help to ensure your case moves toward a positive result quickly and cost-effectively.

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