Understanding Florida’s Bankruptcy Means Test

Deciding to file for bankruptcy is not as simply as filling out a few forms and going to the courthouse. In fact, there are a myriad of rules and regulations that must be met for a Chapter 7 bankruptcy to be officially recognized by a Florida court. For example, an important consideration is the “means test.”

The means test determines whether your current monthly income exceeds, or is less than, the state’s median income. If your currently monthly income is greater than the median income in Florida, the means test will require a more complicated expense formula to determine whether you are even eligible for bankruptcy under Chapter 7.

Image Source (CC BY 2.0) by Fried Dough via flickr
Image Source (CC BY 2.0) by Fried Dough via flickr

How Your Current Monthly Income is Calculated

Your current monthly income (a.k.a. “CMI”) is an average of your monthly income (gross, not net) for the six months before filing for bankruptcy. Keep in mind that your current monthly income will also include your non-filing spouse’s gross income, any financial assistance from family, and any gross income derived from a business.

What Happens After Your Current Monthly Income is Established

Once your CMI is determined, deductions are made to determine your net monthly income and your disposable income. The deductions are broken down by categories. Here are some examples:

  • Expenses from your home – a local housing allowance is available and the exact amount is based on the county you live in. The exact amount also depends on your household size.
  • Expenses for regular transportation – you can deduct operating expenses and ownership expenses. Operating expenses vary depending on the number of cars you own and where you reside. The amount of ownership expenses you can deduct is the greater of (i) an allowance set forth by the IRS based on the number of family cars or (ii) the payment made on your car during the ensuing five years after filing, which is then divided by 60.
  • Living expenses – the IRS provides guidelines for “standard living expenses” that can be deducted.
  • “Other” necessary expenses – Florida has a catchall for expenses such as child care, medical care, dental care, etc.

Once you deduct the above-referenced expenses from your current monthly income, you have your net monthly income. If your net monthly income exceeds $166.66 per month, you fail the Florida means test.

What Happens If You Fail the Means Test

Failing the means test does not necessarily mean you are prohibited from filing for Chapter 7 bankruptcy. However, it does mean, under the law, that there is a “presumption of abuse” and you are initially prohibited from filing a Chapter 7 bankruptcy. Nevertheless, you may be able to petition the court to make an adjustment to your income or expenses so that you pass the means test. Judges have the discretionary authority to determine whether special circumstances warrant allowing a Floridian to file a Chapter 7 bankruptcy. Examples of special circumstances include losing your job, a serious, sudden health issue, or extremely high child care expenses.

Contact an Experienced Florida Bankruptcy Attorney Today

As you can see, even qualifying to file for Chapter 7 bankruptcy can get complicated. You should not try to do this alone. Contact the experienced Florida bankruptcy attorneys at Hoffman, Larin & Agnetti, P.A. Our firm offers a free, no-obligation consultation for all bankruptcy-related issues, so call or contact us today!