In Utah, bankruptcy filers must take what is known as a means test. It is a way of determining your capacity for repaying your creditors. If you fail the test, your only option is to file a Utah Chapter 13 bankruptcy action. Chapter 13 requires the restructuring of your debt to pay creditors (in full or in part) over time. If you pass the test, however, this means that you meet the qualifications and are allowed to file for Chapter 7. Under Chapter 7, most of your debt is eligible for permanent discharge.
What Is a Means Test?
The U.S. Department of Justice describes a bankruptcy means test as a method of determining whether you qualify to file for Chapter 7. This is determined by a complex set of formulas, based on income levels and other related factors. To complete the test, you simply provide a few brief answers regarding your income and expenses for the past six months. The test uses data from the Census Bureau and Internal Revenue Service to compare your expenses with national standards of allowable living expenses and local transportation, housing and utilities data. Finally, your income will be compared to your state’s median income data, to see how your financial capacity compares to average.
Median Income Requirements
It is important to note that median income requirements for the test vary from state to state. They are also revised frequently, to reflect current economic conditions. Currently, the income cutoff Utah residents (as of May 15, 2015) in a single-member household is $52,865. If the household is two members, the amount is $59,546; three members is $67,632 and four or more is $73,446.* If your income is below this level, you are exempt from the test. If it’s not, you must complete the test to determine if your expenses offset your income enough to qualify. To verify the current income requirements, check the U.S. Trustee site (http://www.usdoj.gov/ust) or contact our office for up-to-date information.
Expenses and Means Test Exemptions
In addition to the income thresholds described above, you are not required to take the test if you are disabled as a result of U.S. military service, and if your debt was accumulated during your active duty period. Expenses that may be eligible for deduction include your home mortgage, car loans, child or spousal support and health insurance, as well as some modest deductions for food, clothing and utilities.
The means testing standards are understandably and potentially confusing for most people. Fortunately, you don’t have to figure this all out on your own. At Lewis Adams & Associates, we are experts at helping good people find their way out from under an unmanageable mountain of debt. Contact our office today for a free consultation. We can help you figure out the means test and handle all aspects of your Utah bankruptcy case.