If you are faced with overwhelming debt but are over the often misinterpreted means test, you may still qualify for a Chapter 7. To understand how, you first must know that the means test is presumptive not dispositive. The means test essentially makes this assumption: If you make a certain amount of income you should have enough disposable income to be able to afford a monthly payment for the benefit of your creditors.
When the Means Test Doesn't Work
BUT-- this is a big—but, if you have large family expense and obligations such as child support, maintenance, extraordinary medical expenses and/or day care, this may not be true.
You really might not have any money left over at the end of the month. In other words, despite a decent income, your expenses eat up any disposable income. If true (and they are the kind of expenses allowed by the court--sorry a $400 a month manicure budget will not fly), you can get yourself into a 7.
How it Works
A simple example illustrates the point. Compare two households, consisting of a husband, wife, a three year old child and an income of $70,000. (just over the means test for a household of three.) In household one, the husband is the sole breadwinner and the wife stays at home to care for the child. However, in the second household both spouses work, each making $35,000 per year. However, with both people at work the second couple must incur child care expenses of $400 per month, an allowable expense not incurred by the first household.
Let's further assume household two has a spouse that must pay child support for a child of a previous marriage of $300 per month. Same income but vastly different expenses. Those necessary expenses may be enough to get the second household into a Chapter 7 whereas the first household would probably not.
So, don't automatically assume you are a Chapter 13 simply because you fail the means test. Consult an experienced Chapter 13 attorney who can advise you how your expenses might be used to your advantage. He or she will also help reallocate your budget to further increase your odds or at the least minimize your Chapter 13 payments.