I’ve found a new job, can I still file bankruptcy?

If you’ve read this blog with any frequency, you’ve undoubtedly seen numerous posts about bankruptcy reform and the means test. Indeed, much has been written about the means test, the vaunted gatekeeper to chapter 7 bankruptcy protection implemented by Congress as part of BACPA in 2005. Under the new law, families that earn above the median income in their state must pass the means test in order to qaulify for chapter 7 bankruptcy.

Will a new job give you a failing grade on the means test and prevent you from filing chapter 7 bankruptcy? Likely, no. First of all earning a salary doesn’t automatically preclude anyone from qaulifying for chapter 7. Only individuals and families that earn more than the average in their states must pass the means test in order to qaulify and often do.

In addition, if you’ve had a prolonged period of unemployment even a new job with a high salary shouldn’t pose a means test problem.  This is because the means test deducts allowed expenses from your current monthly income (average income over the last six months). If after expenses you have very little “disposable income” you will qaulify for chapter 7. The six month look back period allows your period of unemployment to be averaged in with your new salary in calculating your current monthly income. For example, if you have recently landed a job that pays $100,000 annually but have only been working for 2 months, you will likely still qaulify to file for chapter 7 bankruptcy because your average income over the last six months (which will include four months of no salary) will put you below your state’s average income.

The means test can be complicated, if you have questions, it is wise to consult an attorney. If your attorney advises you that your income is too high for chapter 7, chapter 13 bankruptcy may be a good option.