If the debtor's current monthly income is more than the state median, the Bankruptcy Code requires application of a means test to determine whether the chapter 7 filing is presumptively abusive. Abuse is presumed if the debtor's aggregate current monthly income over 5 years, net of certain statutorily allowed expenses, is more than (i) $12,850, or (ii) 25% of the debtor's nonpriority unsecured debt, as long as that amount is at least $7,700.
The debtor may rebut a presumption of abuse only by a showing of special circumstances that justify additional expenses or adjustments of current monthly income. Unless the debtor overcomes the presumption of abuse, the case will generally be converted to chapter 13 (with the debtor's consent) or will be dismissed.
In Texas, as per the federal Bankruptcy Code, if a debtor's current monthly income exceeds the state median, the means test is applied to determine if a Chapter 7 bankruptcy filing is considered abusive. The presumption of abuse arises if, over a five-year period, the debtor's income, minus allowed expenses, exceeds either $12,850 or 25% of their nonpriority unsecured debt, provided that this amount is at least $7,700. Debtors have the opportunity to rebut this presumption by demonstrating special circumstances that warrant additional expenses or adjustments to income. If the debtor cannot overcome the presumption of abuse, the bankruptcy case will typically be converted to a Chapter 13 bankruptcy, with the debtor's consent, or it will be dismissed. It's important to note that these figures are subject to periodic adjustments to reflect changes in the consumer price index, so debtors should verify the current amounts at the time of filing.
