Bankruptcy Means Test

Understanding The Bankrupcy Means Test

Calculating Disposable Monthly Income:
To calculate your disposable monthly income, you simply deduct your expenses, including mortgage payments or rent.

A bankruptcy attorney should be consulted to determine if you are required to file for Chapter 13 Bankruptcy, but to get a rough estimate of your disposable monthly income (DMI) take your six month average income and subtract all allowable expenses. Expenses can include: mortgage and rent, past due taxes, priority debt, secured debt and $1,500 in private school tuition. If the difference is more than $166.66 per month and $10,000 of the debt owed could be paid with in 5 years, you are required to file for Chapter 13 Bankruptcy. If not, additional calculations must be made.

The next calculation is used to determine if you will have more than $100 per month to pay at least 25% of your unsecured debt to creditors over the next 60 months. If you do, then you will be required to file for Chapter 13 Bankruptcy, if you do not, then you can file for Chapter 7 Bankruptcy. If a judge determines that you have "extenuating circumstances," he or she may determine that you are eligible to file for Chapter 7 Bankruptcy regardless of the outcome of the calculation.