Written by Attorney Eva Bacevice.
Updated August 17, 2020
When you are considering filing a Chapter 7 bankruptcy in California, completing the Chapter 7 Means Test to make sure you qualify is one of the first steps. The Means Test became part of the bankruptcy process back in 2005 when Congress made significant changes to the federal Bankruptcy Code. At the time Congress had a lot of concern about people abusing the bankruptcy process - they believed that many of the people who were filing Chapter 7 cases could afford to pay some or all of their debts. To counteract this “presumption of abuse,” they created the Means Test to make certain that Chapter 7 relief was available only to the people who truly needed it. You can pass the bankruptcy Means Test in California in one of two ways - first, there is an income cutoff. If your current monthly income is less than the median income for a family of your size in California, then you are immediately qualified for Chapter 7. If your current monthly income is higher than the median income, you can still qualify by completing the full Means Test, where you can show a very detailed account of all your income and allowed expenses. If, after going through the full calculation, you can show that there is little or no disposable income left at the end of the month, you qualify to move forward with your Chapter 7 in California.
California Median Income Levels
California Median Income Standards for Means Test for Cases Filed On or After May 1, 2020
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Discharge in Bankruptcy for California
After you file a California bankruptcy there are several steps that you need to complete to successfully achieve the discharge at the end of your Chapter 7 case. The California bankruptcy discharge is the point near the end of your case when your debts are eliminated, meaning that you don’t have to pay them and can move on to a fresh start. It is important to remember that some debts, like child support, will survive a bankruptcy because they are non-dischargeable. But, chances are, the bulk of your debt is unsecured like credit cards and medical bills, all of which can and will be eliminated by your California bankruptcy discharge. To get to this point you will need to file all your paperwork, complete two credit counseling courses and attend your Meeting of Creditors with your bankruptcy trustee. Partnering with Upsolve means we can help walk you through all of these details, step by step. After your Meeting of Creditors has concluded your discharge should be issued in approximately 60 days.
California Means Test Calculator
If you pass the bankruptcy Means Test in California based on the income limits, congratulations! You are all set to move forward with your California bankruptcy. If your current monthly income (an average of all household income over the last 6 months) is higher than the median income, you will need to go through a full means test calculation. When doing so, it is very important to make certain that you are using the most up-to-date California Means Test Calculator. While you can find any number of Means Test Calculators online, it is hard to know which are regularly updated. If you use Upsolve’s California Mean Test Calculatoryou do not need to worry, as it is current to the day for California and all other states. If your ability to obtain Chapter 7 relief rests on the final number, it is vital to use the most current information. Additionally, Upsolve can also help you through the rest of the process to complete all the necessary components of your California bankruptcy case and successfully achieve your discharge.
What Happens If I Fail The Means Test for California
If you fail the bankruptcy Means Test in California, there are several things you can check to see if it is still possible to qualify for a Chapter 7 bankruptcy. First, you could take a look at the Means Test calculation to make certain that you included all possible expenses. It can be easy to miss an expense if it is something you only buy a couple of times per year, like school supplies for your kids. In that case, you should figure out the total you spend per year and divide it over 12 months to calculate the monthly amount. If you find enough allowed expenses like this, it could be enough to pass the Means Test. There is also a section at the end where you can list items that are not specifically included to see if they can also count. If you are still not able to pass the Chapter 7 Means Test after double-checking all your expenses, it is possible that you might qualify in the near future if something about your situation changes. For example, if you or your partner is pregnant or you are intending to have an elderly relative move in with you, then your family size is about to increase. If your work is seasonal, perhaps tied to the wineries, then your income is going to be at its highest at the end of busy season. In that case, waiting a month or two could make enough of a difference. If any of these apply to you, then waiting a few months while you go through the steps to get ready for your California bankruptcy might be the answer. If none of this applies, then it may be time to consider a Chapter 13 bankruptcy instead as an alternative form of relief.