In Florida, individuals considering Chapter 7 bankruptcy may have several questions, including understanding income limits that may deem them ineligible for a Chapter 7 filing. Regardless of your income, you can file for bankruptcy. However, the court may not approve your case if you exceed the income limits, with certain exceptions. The following describes the limits and some additional considerations to help you make informed decisions on how to proceed.
The means test
The Chapter 7 bankruptcy process requires individuals to undergo a means test. This process compares their monthly income to their state’s median income. If your income is below the median, you may qualify for Chapter 7 automatically. However, if your income exceeds the median, you may still be eligible to file, but your finances must undergo a more detailed assessment.
The median income numbers receive updates approximately twice a year, and the following limits were in effect in Florida for filings on or after November 1, 2022:
- Single filer: $60,429
- Household of two: $74,131
- Household of three: $83,396
- Household of four: $100,476
The disposable income test
If your income level is higher than your state’s median, you may qualify based on your disposable income. This calculation involves deducting all allowable expenses from your monthly income, with the remainder called your disposable income. Allowable expenses include housing, transportation and necessary living expenses for you and your family. Your remaining disposable income is integral to determining whether you are eligible for Chapter 7 bankruptcy. Additional deductible expenses include childcare, health insurance, out-of-pocket care, and court-ordered child or spousal support payments.
Calculating allowable expenses
If your income exceeds the median and you must provide details on your allowable expenses, it is critical to account for them properly. According to bankruptcy laws, certain expenses fall in the “reasonable and necessary” category and have limits based on national averages. Suppose you have higher-than-average costs for healthcare because of a special-needs child, for example. In that case, you may need to provide proof of the expense for justification. Accurate accounting and presentation of your allowable expenses can improve your chances of qualifying for a Chapter 7 bankruptcy.
Income limits are a primary consideration for Chapter 7 bankruptcy eligibility. However, certain exceptions and complexities can affect your eligibility. For example, the size of your household, financial obligations and other particular circumstances can influence the outcome of your bankruptcy case.
Understanding the income limits for Chapter 7 bankruptcy is essential when seeking debt relief. Knowing the tests and exceptions may help you qualify even if your income exceeds your state’s median so that you can make a fresh financial start.