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Washington State Bankruptcy Laws

The Means Test

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The Means Test: Do I Qualify for Chapter 7 Bankruptcy?

The first step to determine whether you qualify for Chapter 7 or Chapter 13 Bankruptcy is the Means Test.  The Means Test averages your total household income over the past 6 months and based upon your household size and certain allowable expenses and deductions, determines whether or not you have the financial means to repay more than $6,000 of your unsecured debt over a 5 year period.  If you do have the financial means to repay more than $6,000 of your unsecured debt over a 5 year period.  If you will probably have to repay some of your unsecured debt in Chapter 13 Bankruptcy.  If you do not have the financial means, you will probably qualify for a 100% discharge of your unsecured debts in Chapter 7 Bankruptcy and not have to repay any of these debts.

Washington State Median Income:

If your household size is not above the following median income levels over the past 6 months, there is no presumption of abuse for you to qualify for Chapter 7 Bankruptcy.

Below are the current income parameters for the Means Test in Washington State:

                                   Average 6 Month Gross Income     Annualized Last 6 Months Gross Income

Household of 1:                      $4,306                                         $51,671

Household of 2                       $5,160                                         $61,919

Household of 3:                      $5,766                                     $69,195

Household of 4:                      $6,700                                     $80,404

Additional Household            Add $625                                    Add $7,500

Member:

Passing the Means Test if your household is above the median Income:

Even if your household income is above these median income level over the past 6 months, there is still no presumption of abuse to file for Chapter 7 Bankruptcy if you have certain, allowable, reasonable and necessary monthly expenses that are greater or in addition to the average household for your household size.  Some examples of additional expenses are child support, high monthly medical expenses/co-pays, daycare expenses, higher than average monthly mortgage or rent payments.   Our experienced Seattle bankruptcy attorneys can analyze your income and expenses under a Means Test Analysis to determine whether you pass the Means Test for Chapter 7 Bankruptcy where or not you are above the median income.

Failing the Means Test, but Rebutting the Presumption of Abuse:

Even if you do not pass the Means Test, you can still qualify for Chapter 7 Bankruptcy if you can rebut the presumption of abuse to qualify for Chapter 7 Bankruptcy.  One scenario for rebutting the presumption of abuse is where your household income is far above the median income over the past six months, but a recent terminal illness forces you to quit your job and retire.  You can then file a Declaration of Rebuttal of Presumption of Abuse and ask the U.S. Trustee of the bankruptcy court not to consider your last 6 months income because you or your spouse is terminally ill and no longer able to work, therefore demonstrating that you no longer have the financial ability to repay any portion of your unsecured debts.   Therefore, given your recent financial and medical circumstances, it would not be abuse for you to qualify for a discharge under Chapter 7 Bankruptcy.

Step 2: No Disposable Monthly Income Requirement:  Even if you pass the Means Test or can rebut the presumption of abuse, you still may not qualify for Chapter 7 Bankruptcy.  If your current monthly household income and expenses affords you more than $100/month to pay your unsecured creditors, the bankruptcy court may find “actual abuse” for a Chapter 7 Discharge you still may not qualify for Chapter 7 Bankruptcy and may have to repay a portion of your unsecured debt over a 3 or 5 year period in Chapter 13 Bankruptcy.  This situation is most common where a debtor passes the Means Test, but his or her and/or spouse’s monthly income increased significantly over the most recent few months where they have now have significant money per month to pay back their unsecured creditors a portion of their debts.   This can occur where a debtor recently received a promotion of a much higher paying new job.