Chapter 7 bankruptcy is one of the most common types of bankruptcy filed in New Mexico. Filing this type of bankruptcy requires passing the Chapter 7 bankruptcy means test. The test determines if you have enough disposable income to repay your debts.
The first step in the means test involves reviewing your income for the past six months. If your income is below the state’s median income, you can file Chapter 7 bankruptcy. In New Mexico, the median income for one person is $43,195. The allowable median income is adjusted upwards based on the size of your family.
The test does take income changes into account. For example, if you’ve recently lost a job, the test will factor in your reduction in income. Any increase in revenue will count as well.
Exceptions to the rule
The Chapter 7 bankruptcy means test does have some exemptions. For example, if most of your debt is business, you’re not required to pass the means test. The means test is primarily for people who file bankruptcy because of consumer and medical debt.
Disabled veterans are possibly exempt from the means test, but only if their debt is accumulated during active duty or while working for homeland defense. A person with a high income is also possibly exempt if they prove they can’t repay their debts.
What happens if you fail the means test?
If you fail the means test, you still have a chance to file Chapter 7. It depends on your total allowable expenses over the past six months. These expenses include items such as rent, medical care, and food.
Income remaining after your allowable expenses is disposable income. You may qualify for Chapter 7 if the courts decide your disposable income is too low to pay your debts.