Chapter 7 Bankruptcy Means Test Montana 2024

The Bankruptcy Means Test in Montana helps you estimate whether you qualify for Chapter 7 bankruptcy. The first part of the means test is based on your income relative to those in Montana and household size. The second part deals with your expenses.
Information in this article does not constitute legal advice, it is for informational purposes only, and may not constitute the most up-to-date information. Readers should contact their attorney for advice on any particular legal matter.

When filing for bankruptcy in Montana, you may have to take the bankruptcy means test.

Depending on which type of bankruptcy you are planning on filing for, the means test does a few different things. For Chapter 7, the means test determines whether or not you are eligible to apply. If you make over a certain amount in Montana, you may not be allowed to file for Chapter 7 bankruptcy.

With Chapter 13 bankruptcy, the means test determines if you have enough monthly disposable income to make repayments each month to your unsecured creditors. It also can help determine if you are eligible for a 3-year or 5-year plan. With Chapter 13, there is not a maximum amount that you can make.

The means test in Montana looks at a few things. First, it considers what your monthly income is, and some incomes may be protected. We will cover that later. Next, your monthly expenses are considered. The test looks at your cost of living expenses, as well as any other required monthly payments. Finally, the means test looks at the amount of debt an individual has. Considering all these things, the means test determines whether or not a person can make monthly payments into a repayment plan, should they be approved for bankruptcy.

If you live in Montana and are planning on filing for Chapter 7 or 13 bankruptcy, be sure to continue reading to see exactly what to expect when completing your means test, or jump ahead to the section that interests you most.

Montana Means Test Calculator

If you are unsure as to whether or not you may qualify for a Chapter 7 bankruptcy, feel free to take our free Chapter 7 calculator. The calculator was designed with you in mind and is based on the bankruptcy means test forms in Montana! We want to make sure you understand your eligibility, along with the other options that may be available to you based on your individual situation.

Once you take this test, you will be able to see what forms of bankruptcy you may be eligible for, and compare what may be the best option for you.

Keep on reading to understand how Chapter 7 works in Montana, or jump ahead to the section that interests you most.

Table of Contents

Montana Median Income Limits

The bankruptcy means test income limits in Montana are updated every 6 months or so. The current numbers below are for cases filed on or after April 1, 2024 (source). If you have a household size that is bigger than the maximum number below, you would just add $9,900 for each additional household member.

# of PeopleAnnual Income
1$65,242
2$80,779
3$84,585
4$111,516
5$121,416
6$131,316
7$141,216
8$151,116
9$161,016

Bankruptcy Means Test Explanation

As mentioned earlier, the means test is a document you will fill out at the beginning of your bankruptcy filing process that will determine your eligibility and repayment plan for bankruptcy. To fill out this form, you will need to report a few things. The first is your income. Here are some things to keep in mind when reporting your income on your Montana bankruptcy means test document:

  1. Even if your spouse is not filing with you, you will need to report their income. The means test considers the income of the entire household, not just the individual who is filing. There are some exceptions, especially if you are legally separated from your spouse, but still living in the same residence.
  2. Your household income is compared to the mean monthly income of households in Montana. This then determines what your eligibility is for bankruptcy and what repayment plan you may be looking at.
  3. Some forms of income, namely any Social Security or other retirement income, do not count as income on your means test. Make sure you understand what you do not have to disclose to have the best chance of approval.
  4. If you have an unstable or variable monthly income, the average of your past six months of income is used. To find this, you would add each month of income for the past six months together, and then divide the sum by 6. The number you end up with is what you would report as your average monthly income.

Chapter 13 Bankruptcy Means Test and Debt Limits

To be able to file for Chapter 13 bankruptcy, there are a few income limits an individual has to meet. First, the individual has to have less than $465,275 of unsecured debt. This is a part of the Chapter 13 debt limit. Unsecured debt is any form of debt that is not backed by an asset that can be held as collateral. This means that, if you were unable to repay your unsecured debt, there wouldn’t be anything that the creditor could repossess to recoup the lost payments. Unsecured debt includes things like credit card debt, medical bills, utility bills, and more.

Next, an individual cannot have over $1,395,875 in secured debt. Secured debt is debt that is backed by collateral. This can include things like home mortgages, car loans, and other loans where something can be repossessed to recoup the cost of nonpayment.

Other Requirements

Debt limits are not the only requirements that have to be met when filing for Chapter 13 bankruptcy. There are other requirements, such as:

  • Only an individual can apply for Chapter 7 & 13 bankruptcy. Businesses are not eligible for these.
  • The individual cannot have had a bankruptcy case dismissed within the previous 180 days. There are exceptions if there are emergencies or an error caused your dismissal. The court decides on those cases individually.
  • The individual cannot have had a Chapter 13 bankruptcy completed within the past two years (four years if it was a Chapter 7 bankruptcy). This means, that if you went through the bankruptcy process successfully and had some of your debts discharged within this timeframe, you are not eligible and will have to wait for the time to pass.
  • The individual has taken the required credit counseling courses. When filing for Chapter 7 or 13 bankruptcy, it is required that you complete two credit education courses with a court-approved debt counselor. Failing to do so would prevent you from eligibility.
  • All tax returns for the previous four years must have been filed by the individual.
  • For Chapter 13 bankruptcy, you have enough disposable income to make a monthly repayment to the bankruptcy trustee who will then distribute the payment amongst the various creditors and other fees. If you do not have enough disposable income, the court may decline your case and recommend Chapter 7 bankruptcy instead.

If you meet these requirements, the court may approve your case. That said, you may consider the pros and cons as well. For example, your credit score and report may be negatively affected.

What Happens If I Pass the Means Test In Montana? 

If you pass the means test, you may be eligible for a Chapter 7 bankruptcy! In a Chapter 7, this will discharge your eligible debts and allow you to have a fresh start, financially. You can discharge debt such as credit cards, personal loans, and medical. The whole process is around 4-6 months, so it is very quick. You may not have to pay anything back, but there is a cost which is an upfront attorney fee that generally ranges from $1000-$2500. It also provides automatic stay so your creditors cannot come after you anymore. However, it is liquidation bankruptcy, so be sure your assets (such as your house and car) are protected under the state exemptions. 

Timeframe of Filing Another Bankruptcy

If you filed for bankruptcy in the past and are looking to file again, be sure that the appropriate amount of time has passed. Before you file another chapter of bankruptcy, you may have to wait a few years. Check out the timeframe below:

Chapter Filed Earlier, Chapter to be Filed, Time Restriction

  • Chapter 13, Chapter 13, 2 years between filing
  • Chapter 7, Chapter 13, 4 years between filing
  • Chapter 13, Chapter 7, 6 years between filing
  • Chapter 7, Chapter 7, 8 years between filing 

Are There Any Details Of The Bankruptcy Means Test Specific to Montana?

The means test itself does not change from state to state. However, the test compares your average monthly income to that of the state’s household average monthly income. Because of this, where you live will change what average income your income will be compared to.

For example, the means test income levels would not differ between Billings and Missoula, but that income limit may differ between Montana and California.

Options If You Fail the Bankruptcy Means Test in Montana

If you fail the means test for bankruptcy, it simply means that you are not eligible for that specific type of bankruptcy. With Chapter 13, failing the means test means you do not have enough disposable income to make a payment at the end of each month to the bankruptcy trustee. Because of this, the court cannot grant you a Chapter 13 bankruptcy, which may require sizable monthly payments. If you fail the means test for Chapter 7 bankruptcy, then you make too much compared to the requirements. Regardless of the reason why you failed the means test, you have many other options to consider.

Chapter 13 Bankruptcy:

If you were denied for Chapter 7 bankruptcy, you may want to consider filing for Chapter 13. You were likely denied Chapter 7 because you make too much money. Luckily, Chapter 13 bankruptcies rely on an individual making more than they need to help pay off their debts. If you were denied Chapter 13, it may be because you didn’t make enough money to afford monthly payments at the end of each month. Because of this, you may qualify for a Chapter 7 bankruptcy. If you were denied for one form of bankruptcy, see if you are eligible for the other.

Some individuals prefer Chapter 13 over Chapter 7 bankruptcy if they have more equity than what's allowed under the Montana bankruptcy exemption; Chapter 13 might be the way to go.

Debt Settlement:

Debt settlement works in a variety of ways. Either you or a company on your behalf negotiates with your creditors until they agree to a lower debt balance that you can then pay off, leaving a portion of your debt forgiven. An example of this may look like the following: Say you owe $30,000 in debt. You may approach your creditor and negotiate the amount down to $15,000. Often, especially if you are working with a debt settlement company, you will have created an account that holds a sum of money that you are willing to pay immediately. If the creditors agree, then you will have $15,000 of forgiven debt once the remaining sum is paid off.

Cons of Debt Settlement

There are some potential negatives of this option, namely that you tend to have to miss a few payments for your creditors to be willing to negotiate. Not only does this put you at risk of being sued by the creditor, but it also impacts your credit score for up to seven years.

Additionally, there is no legal protection so if a creditor does not agree to a negotiated payment plan, they may sue you. If a creditor sues you then that may go on your credit report. 

There are also potential taxes on the forgiven debt. Whatever debt was forgiven in the settlement may be taxable and you have to report the canceled debt on your tax return for the year it was canceled. Generally, you may have to report any taxable amount of canceled debt as income. The creditor may send you a 1099-C form you would have to fill out.

Debt Management:

You could also look into considering a debt management program. Debt management programs are also known as credit counseling. When you are working with a debt management company, you will have to report your entire financial situation to the entity. They will then devise a plan that best helps you get out of debt as efficiently as possible. They are also able to help negotiate lower interest rates on any loans or other lines of debt you may already have. This can take anywhere from 36-60 months.

The pro of this is that it may allow you to pay into the principal rather than the increasing interest. So, if you have credit cards with high-interest rates and want a less aggressive option, this may be something to look into. 

The downside to this option is that you still have to pay off everything you owe, so it may be a more expensive option. The good news, is that it won’t hurt your credit as much as some of the other options may. However, the accounts included in the program will close which may take a small hit to your credit.

Conclusion

Overall, the means test is just a way to see what forms of debt relief and bankruptcy you may qualify for. Using the means test can help you better understand your financial situation and whether or not bankruptcy is right for you. If you have any questions or want to talk more in-depth, contact a local attorney to set up a free consultation! 

  1. IRS. (2024 April 4). Retrieved from: https://www.irs.gov/taxtopics/tc431#:~:text=In%20general%2C%20if%20your%20debt,in%20which%20the%20cancellation%20occurred
  2. Jeppson Law. (2024 April 4). Retrieved from https://jeppsonlawoffice.com/means-test/ 

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