In Georgia, Chapter 7 bankruptcy allows you to discharge unsecured debt and partially repay creditors by liquidating select assets. The initial way to determine your qualification for Chapter 7 is by the means test. The test compares your household income to the median income for a household of the same size in Georgia. If your income falls below the state’s median, you automatically qualify for Chapter 7. In this blog, we will be discussing the importance of the means test and how Georgia’s median income affects your eligibility for Chapter 7 bankruptcy.
READ MORE: How Do You Know If You Need To Declare Bankruptcy in Georgia?
Understanding the Means Test
The primary purpose of the means test is to prevent higher-income earners from filing for Chapter 7 bankruptcy when they might financially be able to repay some of their debts through a Chapter 13 repayment plan. The test makes sure that Chapter 7 is only for those who truly cannot afford to pay their creditors.
The means test helps determine if you qualify for Chapter 7 based on your income and expenses such as:
- Income Threshold: To pass the means test, your total monthly income over the next 60 months must be less than $7,475. This figure is calculated by subtracting your household expenses from your income.
- Household Expenses: These include costs for housing, utilities, food, clothing, taxes, transportation, court-ordered payments, child care, and healthcare.
- Disposable Income:
- If your disposable income is between $8,175 and $13,650, further calculations are needed to see if there is a presumption of abuse.
- If your disposable income exceeds $13,650, there is a presumption of abuse, making it unlikely you’ll qualify for Chapter 7.
What is Georgia’s Median Income?
Georgia’s median income levels, which are updated annually, serve as a benchmark for Chapter 7 eligibility based on household size. For 2024, the median income levels in Georgia are:
- 1-Person Household: $62,468
- 2-Person Household: $79,803
- 3-Person Household: $90,959
- 4-Person Household: $112,675
How Georgia’s Median Income Affects Chapter 7 Eligibility
If your income exceeds the median for your household size, you will need to go through a more detailed means test:
- Income Above Median: You will not automatically qualify for Chapter 7. Further analysis is required to determine if you can still qualify.
- High Disposable Income: A higher income suggests you may have the means to pay off some debts, which could affect your eligibility.
Alternatives if You Don’t Qualify for Chapter 7
If your income exceeds the median level and you don’t automatically qualify for Chapter 7, you may still have options:
- Chapter 13 Bankruptcy: This alternative allows for a repayment plan over 3 to 5 years. It’s designed for those who can manage some level of debt repayment.
- Debt Settlement or Consolidation: Explore options to settle your debts for less than what you owe or consolidate them into a manageable monthly payment.
Contact Duncan & Brow and Figure Out Your Legal Options
Not sure when you should file for bankruptcy? We can help you at The Law Firm of Duncan & Brow with a quick overview. Contact the law firm today to learn more about your bankruptcy options and debt management!
