Understanding the Chapter 7 Bankruptcy Means Test in Melbourne, Florida Filing for Chapter 7 bankruptcy in Florida can offer a fresh start for individuals overwhelmed by unsecured debts like credit card balances, medical bills, or personal loans. However, not everyone qualifies for Chapter 7, as it’s designed for those with limited financial means. The cornerstone of determining eligibility is the Chapter 7 means test, a federal requirement that assesses your income and expenses to ensure you lack the ability to repay debts. In this blog, our Palm Bay, Florida Bankruptcy Attorney explains the means test in Florida, its step-by-step process, and why hiring a bankruptcy attorney is crucial for navigating this complex evaluation.
What is the Chapter 7 Means Test? The means test, introduced under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, prevents high-income earners from filing Chapter 7 bankruptcy, steering them toward Chapter 13, which involves a repayment plan. In Florida, the means test is particularly important due to the state’s unique economic landscape, including varying income levels and cost-of-living factors. The test compares your household income to Florida’s median income and evaluates your disposable income after allowable expenses. Passing the means test qualifies you for Chapter 7, allowing most unsecured debts to be discharged in a matter of months.
Step-by-Step Guide to the Florida Means Test
- Determine Your Current Monthly Income (CMI) The first step is calculating your Current Monthly Income, which includes all income sources (wages, business income, rental income, pensions, etc.) for the six months prior to filing, averaged monthly. In Florida, this includes income from seasonal work, common in tourism-driven areas like Miami or Orlando, and other sources like alimony or regular gifts. Exclude one-time payments, like a tax refund, and certain benefits, such as Social Security. Multiply your CMI by 12 to get your annual income.
- Compare to Florida’s Median Income Next, compare your annualized CMI to Florida’s median income for a household of your size, as set by the U.S. Census Bureau and updated periodically. As of 2025, Florida’s median income varies: approximately $66,284 for a single-person household, $82,708 for two people, $94,150 for three, and $108,351 for four, with adjustments for larger households. If your income is below this threshold, you automatically pass the means test and qualify for Chapter 7. If it’s above, you must proceed to the next steps.
- Calculate Disposable Income If your income exceeds the median, you’ll complete the second part of the means test, which deducts allowable expenses from your CMI to determine your disposable income. Allowable expenses include:
- Standard IRS Deductions: Based on national and local standards for living expenses like housing, utilities, and transportation. Florida’s housing costs, which vary significantly between urban areas like Miami and rural regions, are factored in using IRS local standards.
- Actual Expenses: Certain actual expenses, like taxes, mandatory payroll deductions, insurance, and court-ordered payments (e.g., child support), are deductible.
- Secured Debt Payments: Payments on secured debts, like mortgages or car loans, are included, adjusted over a 60-month period. If your disposable income after these deductions is below a certain threshold (typically $166.67/month), you pass the means test. If it’s higher, you may be presumed to have enough income to repay debts, disqualifying you from Chapter 7.
- Consider Special Circumstances If you fail the means test, you may still qualify by demonstrating special circumstances, such as high medical expenses or job loss, that reduce your disposable income. In Florida, where hurricanes or medical emergencies can create sudden financial burdens, documenting these circumstances is critical. An attorney can help present this evidence effectively.
Why the Means Test is Complex in Florida Florida’s diverse economy and cost-of-living variations make the means test particularly challenging. For example, housing costs in Miami-Dade County are significantly higher than in rural counties like Alachua, affecting IRS deductions. Seasonal employment in tourism or agriculture can complicate income calculations, as can self-employment income, common among Florida’s small business owners. Additionally, Florida’s homestead exemption, one of the most generous in the U.S., protects your primary residence from liquidation, but only if properly applied—a task requiring legal expertise.
If you live in Melbourne or Palm Bay Florida, or anywhere in Brevard County, Contact us Today for a Free Phone Consultation.