In my last post, I discussed how the beginning steps of the means test work – essentially, how your annual household income is determined in order compare it with the median household income for a household of your size in the area you live in.  Now, if you are above the median household income, you are not necessarily permanently disqualified from filing for Chapter 7 relief.  Today’s post will explore generally the available exceptions to the means test – as in situation where the means test is not looked at.  The exceptions are as follows:

  1. If you are a disabled veteran under 38 USC § 3741(1) and your debts were primarily incurred while you were on active duty,  or while you were performing a homeland defense activity;
  2. If you are a reservist or national guard member who was called to duty for at least 90 days after September 11, 2001 and meet certain requirements; and
  3. If more than 50% of your debts were NOT incurred for a primary household or family purpose. 

Now, I don’t see the first two on a regular basis, but a number of my clients do in fact qualify for Chapter 7 relief as “non-consumers”.  Basically, the law makes an exception to the means test requirement if more than half of your debt was incurred for a business purpose.  Whether that means you used a few lines of credit to float your business, or you invested in real estate – as long as all those debts added together come out to more than your home mortgage, personal credit cards and vehicle debts combined, you may just qualify for Chapter 7 relief even though your income is higher than the means test envisions.

Sometimes it is hard to determine whether you are a non-consumer under this rule, so rather than testing the waters on your own, I recommend you speak to an attorney about whether this is an option for you.  Bad things can happen if you file for bankruptcy without knowing all that is involved.  To learn more about why it is generally not recommended to file for bankruptcy without the assistance of an knowledgable attorney, please click here.