Chapter 7 Income Requirements: The Means TestIn order to be eligible for Chapter 7 bankruptcy relief, you must meet certain income and expense requirements. If your monthly income is less than or equal to the median income in your state, you can file for Chapter 7 bankruptcy (assuming you meet other Chapter 7 eligibility requirements.) If your income is higher than the state median, you must pass the Chapter 7 means test, which looks at your disposable income after deducting certain expenses from your income.
The lower your income, the easier it is to qualify for Chapter 7 bankruptcy.
Veterans' Benefits Count As IncomeUnfortunately, you must include any veterans’ benefits you receive when calculating your income for Chapter 7 bankruptcy. Veterans' benefits may include payments for healthcare, living expenses, and disability. In fact, for purposes of the means test you must include most types of income, other than Social Security Benefits, and in some states, unemployment compensation.
Exception to Means Test for Disabled VeteransIf you are a disabled veteran, you may not have to take the means test at all in order to qualify for Chapter 7 bankruptcy.
If you are a veteran, you are exempt from the means test if:
- you are considered “disabled,” as defined by bankruptcy law (see below), and
- you incurred the debt while on active duty or performing a homeland defense activity.
What Is the Definition of "Disabled"?To qualify as disabled, a veteran must be either:
- rated by the Veterans Administration as at least 30% disabled, or
- discharged as a result of a disability incurred in the line of duty.
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