If you’re considering filing for bankruptcy in Georgia, one of the first things you should consider is whether you qualify for Chapter 7. This largely depends on whether you pass the Chapter 7 Means Test, which is a federal formula used to determine whether you have enough income to pay your creditors. Understanding how this test works and its implications for your financial future can help you make an informed decision.
What Is the Georgia Chapter 7 Means Test?
The means test was introduced by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) and is codified in 11 U.S.C. § 707(b)(2). Its purpose is to prevent high-income filers from getting rid of debts that they could reasonably pay back. The test compares your average monthly income with the median income in Georgia for a household of the same size as yours using Official Bankruptcy Form 122A-1.
Step 1: Compare Your Income to Georgia’s Median
The first step is to calculate your Current Monthly Income (CMI). This is the average of all your income over the last six calendar months, multiplied by two to get an annual figure.
You then compare that number to the current Georgia median income figures published by the U.S. Trustee Program. According to the latest data available, the approximate annual median income for Georgia households is:
- 1 person: ~$54,000
- 2 people: ~$68,000
- 3 people: ~$79,000
- 4 people: ~$94,000 (add ~$9,900 per additional person)
If your income is at or below the median, you will automatically pass the means test and can proceed with Chapter 7. At this point, the analysis concludes.
Step 2: Calculating Disposable Income (Above-Median Filers)
If your income exceeds the median income in Georgia, you will need to complete a full means test using Form 122A-2. This form subtracts specific living expenses approved by the IRS, secured debt payments, and priority debt obligations from your income to determine your monthly disposable income.
Allowable deductions are based on IRS National and Local Standards and cover categories such as food, clothing, housing, transportation, and healthcare. If your remaining income after deducting these expenses falls below a certain threshold, you may still be eligible for Chapter 7 bankruptcy protection.
What Happens If You Don’t Pass the Means Test?
Failing the means test does not mean that you have no options. In some cases, the court may allow you to file for Chapter 7 bankruptcy even if you do not meet the requirements. This is often the case for people with serious medical conditions or who have experienced job loss. Alternatively, you may be able to qualify for Chapter 13 bankruptcy, which allows you to work out a payment plan with the court to repay your debts over time rather than having them discharged outright.
How Georgia Exemptions Protect Your Property
Passing the means test is just one part of the picture when it comes to Chapter 7 bankruptcy. Georgia law, under O.C.G.A. § 44-13-100, provides exemptions that protect certain assets, including your home, vehicle, and household items, from being liquidated. Federal exemptions, as outlined in 11 U.S.C. § 522, are not available to Georgia residents, so it’s important to be aware of the specific state limits.
Filing Triggers Immediate Debt Protection
When you file for bankruptcy, an automatic stay comes into effect under 11 U.S.C. § 362. This immediately stops wage garnishments, calls from creditors, lawsuits and most collection actions. It gives you some breathing room while your case is being processed.
Talk to an Augusta Chapter 7 Attorney Today
The means test has strict rules and specific deadlines, with real consequences if it is filed incorrectly. Duncan Bankruptcy Law, focuses exclusively on Chapter 7 and Chapter 13 cases, as well as student loan cases. With over three decades of experience, our team knows how to guide you through the process and help you protect as many assets as possible under the law.
Contact us today to arrange a consultation.
