Florida Bankruptcy Income & Means Test Guide

Here in the Orlando-Winter Park area, life can be as unpredictable as the afternoon thunderstorms—and your income significantly influences which bankruptcy option might be feasible for you. So, if you’re considering filing bankruptcy in Florida, one of the first things you’ll need to look at is your income.

People usually start thinking about bankruptcy when they’re under a lot of financial pressure—maybe you’ve had some big medical bills come out of nowhere, you’ve lost your job, or you’re dealing with other kinds of financial setbacks.

Fortunately, the law provides some pathways, primarily through Chapter 7 and Chapter 13, to help individuals manage or discharge their debts. Each one is different and caters to different situations:

  • Chapter 7 Bankruptcy: This is what many think of when they hear “bankruptcy.” It’s about wiping the slate clean. You get to erase most of your unsecured debts (like credit card debt or medical bills). But to file under Chapter 7, your income needs to be in a certain range. That’s where something called the “Means Test” comes into play. It checks if your income is low enough to qualify by comparing it to the median income for families in Florida.
  • Chapter 13 Bankruptcy: This one’s more about reorganization. If you’ve got a steady income and you’d rather keep some of your assets (like your home), Chapter 13 could be the way to go. It sets you up with a repayment plan that lasts between three to five years, which helps manage your debts in a way that doesn’t feel overwhelming.

Important: If you are thinking about filing for bankruptcy in Florida, talking to a bankruptcy attorney is strongly recommended. Each bankruptcy type has its own set of rules and financial thresholds, and frankly, it can get a bit complex trying to figure it all out on your own. An attorney can look at your specific situation—like your income, debts, and any assets you want to keep—and help you understand the best route to take.

Does Income Matter When Filing Bankruptcy in Florida?

Absolutely, your income matters when you’re looking to file for bankruptcy in the Sunshine State—particularly for determining eligibility for Chapter 7 bankruptcy. The central tool used to assess eligibility based on income is the Means Test, which compares your income to the median income for households of similar size in your state.

If you’re making less than the median, you’re in the clear for Chapter 7, which can wipe out a lot of your debts completely.

If your income exceeds certain thresholds, you might have to file for Chapter 13 bankruptcy instead, which involves reorganizing debts and setting up a repayment plan, rather than liquidating assets as in Chapter 7.

But what if you’re earning more? That’s where it gets a bit sticky. If your income is higher than the median, you might have to look at Chapter 13 bankruptcy instead. This doesn’t wipe the slate clean but reorganizes them into a manageable debt repayment plan, giving you a chance to catch up without losing everything.

What is the Florida Bankruptcy “Means Test”?

The FL Bankruptcy Means Test is a formula used to determine whether an individual’s income is low enough to file for Chapter 7 bankruptcy—the kind that can erase most debt, like credit card balances and medical bills, without a repayment plan.

Initially, the test compares your average monthly income over the 6 months before filing against the median income for a similar-sized household in Florida:

  • If your income is below this median, you can file for Chapter 7 directly.
  • If it’s above, further calculations are required to see if you still might qualify based on your allowable expenses and debts.

As in other states, individuals filing for Chapter 7 bankruptcy in Florida must complete specific forms as part of the Means Test to determine their eligibility. These forms are standardized for use across the United States.

Here are the most common Means Test forms you’ll encounter when filing for bankruptcy in Florida:

  1. Form 122A-1 (Chapter 7 Statement of Your Current Monthly Income): This is the primary form used in the Means Test for Chapter 7 bankruptcy. It requires you to provide detailed information about your income from all sources. You’ll list your average monthly income based on the six months prior to filing for bankruptcy, comparing it to the median income for a household of your size in Florida.
  2. Form 122A-1Supp (Statement of Exemption from Presumption of Abuse Under §707(b)(2)): If your income is below the state median, you’ll fill out this form, which can exempt you from further Means Test analysis because it establishes that you do not have the means to pay your creditors.
  3. Form 122A-2 (Chapter 7 Means Test Calculation): If your income is above the median for your state, this form is necessary to determine whether you qualify for Chapter 7 based on your expenses and deductions. It involves more detailed calculations, including your allowable living expenses, debt payments, and other financial obligations to determine if you have enough disposable income to repay some of your debts.

What Is the Income Limit for Filing Chapter 7 in Florida?

Determining income thresholds for filing Chapter 7 involves several factors, and it’s not strictly a set number like $100,000 a year. Instead, it depends on your family size and the current FL median income level.

For instance, as of 2024, the median annual income for a single individual in Florida was approximately $52,000; for a family of four, it was around $85,000.

If you earn more, you may still qualify after deducting specific allowed expenses, such as taxes, necessary household expenses, and certain types of debt payments.

Do I Need to Pass the Means Test for Chapter 13 Bankruptcy?

No, you do not need to pass the Means Test to file for Chapter 13 bankruptcy.

Chapter 13 is typically for those who have a regular income and wish to keep their property but need to reorganize their debts to manage payments better. It can be a viable option for those who fail the Means Test for Chapter 7 but still require relief from overwhelming debt.

What Counts as Income in the Means Test?

In the FL Bankruptcy Means Test, income is broadly defined to include just about any regular inflow of money. Here are some things that count as income:

  • Wages and Salaries: The most straightforward source of income, what you earn from your job on a regular basis.
  • Tips and Bonuses: These variable amounts also count, whether they’re from your main job or side gigs.
  • Overtime Pay: If you work extra hours, the pay you receive for that also goes into the income calculation.
  • Self-Employment Income: If you run your own business, your net income (that’s your gross income minus business expenses) counts.
  • Rental Income: Money received from renting out property you own.
  • Interest and Dividends: This includes income from investments.
  • Pensions: Regular payments from retirement accounts are considered income.
  • Contributions from Others: If someone else in your household or an outside contributor regularly helps with your expenses, this is counted too.

Possible Income Exemptions in the State of Florida

In Florida, certain types of income may be exempt from the bankruptcy estate, meaning they may be protected from being used to pay creditors in both Chapter 7 and Chapter 13 bankruptcy proceedings. These exemptions can help people maintain a basic standard of living and protect essential assets during the bankruptcy process.

Some of these exemptions are notably specific to Florida and offer unique protections compared to other states, while others apply to all states:

  1. Homestead Exemption: Florida’s homestead exemption is one of the most generous in the United States. It offers unlimited protection for the equity in your primary residence, provided the property does not exceed half an acre in a municipality or 160 acres elsewhere. This exemption allows residents to protect their home entirely from creditors during bankruptcy, regardless of the home’s value, which is a substantial benefit not available in many other states. To qualify for the homestead exemption, you must have owned the property for at least 1,215 days prior to the bankruptcy filing. If the property was acquired less than 1,215 days before filing, a cap may apply. Note that transferring property into a homestead with the intention of defrauding creditors can lead to the denial of the homestead exemption.
  2. Social Security Benefits: All types of social security benefits, including retirement, disability, and Supplemental Security Income (SSI), are fully exempt from bankruptcy proceedings.
  3. Unemployment Compensation: Benefits received as unemployment compensation are exempt, with the exception being any amounts that are required for child support.
  4. Veterans’ Benefits: All veterans’ benefits are protected under both Florida law and federal law during bankruptcy.
  5. Disability Income: Disability benefits, whether they are from private insurance policies or government programs, are generally exempt from bankruptcy claims.
  6. Pension and Retirement Funds: Florida provides strong protections for most pension and retirement benefits, including public employee pensions and ERISA-qualified benefits. IRAs and other retirement accounts are also protected, with some limits potentially applying to how much can be exempted.
  7. Alimony and Child Support: Alimony and child support payments that are necessary for support are exempt from being seized or used to pay creditors.
  8. Life Insurance Proceeds: Proceeds from life insurance policies are exempt provided the policy expressly states that the proceeds cannot be used to pay creditors. This exemption applies to the cash surrender value of life insurance policies and the proceeds.
  9. Damages for Personal Injury: Compensation received for personal injury claims is exempt, excluding any compensation for punitive damages and pain and suffering amounts.
  10. Health Aids: All professionally prescribed health aids for the debtor or a dependent of the debtor are exempt, ensuring necessary medical equipment and supplies are protected.
  11. Prepaid College Education Trust Fund: Amounts deposited in a prepaid or savings plan for college education are generally exempt, safeguarding future educational expenses.
  12. Public Benefits: Other public assistance benefits, including workers’ compensation benefits and crime victim compensation (unless for crime-related treatment), are protected under exemption laws.
  13. Motor Vehicle: Up to $1,000 in equity in a motor vehicle is exempt. If the homestead exemption is not used, an additional $4,000 can be applied as a wildcard to any property, including vehicles. This flexibility can be strategically important depending on your asset portfolio and needs.
  14. Personal Property: Up to $1,000 in personal property (e.g., furniture, electronics, clothing) can be exempted, or $4,000 if the homestead exemption is not used. Similar to the vehicle exemption, the additional $4,000 can be a strategic tool for protecting a broader range of personal property if the homestead exemption is not applicable.
  15. Head of Household Wages: Florida defines a “head of household” as someone who provides more than half of the support for a child or other dependent. Up to $750 per week or the greater of 75% or 30 times the federal minimum wage of disposable earnings is exempt. This includes both paid and unpaid wages and those deposited in a bank account for up to 6 months. The exemption protects against garnishment by creditors, but there are exceptions, especially for debts related to alimony, child support, or federal debts such as taxes and student loans.
  16. Annuity Contract Proceeds: Proceeds from annuity contracts (excluding lottery winnings) issued to the debtor may be exempt.
  17. Prepaid Medical Savings and Health Savings Accounts: Contributions to health savings accounts and prepaid medical savings accounts may be exempt.
  18. Tuition Programs: Funds in a 529 college savings plan or other prepaid college plans designated for a child’s education are protected.

What if My Income Fluctuates?

Fluctuating income can complicate the bankruptcy process but doesn’t necessarily preclude you from filing. Here in the Orlando and Winter Park area, where tourism and hospitality are significant employers, many residents find that their income isn’t always steady month to month.

If your income varies, the court will look at your average income over the 6 months prior to filing to determine your eligibility. For those with seasonal jobs or variable income, this might mean timing your filing strategically when your average income is lower to qualify for Chapter 7.

If you’re in a job that’s tied to the tourist season—for example, maybe you run a seasonal business or work at a theme park, a resort, or a restaurant that gets busier during certain times of the year—your income might peak during these periods.

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To position yourself better for qualifying for Chapter 7, where your debts could be wiped clean, you might consider filing during a part of the year when your recent income has been lower. If you’ve had a couple of lean months after a busy season, that could possibly be a better time to file, as your six-month income average would be lower.

How Does Overtime Pay Impact the Means Test?

Overtime pay is counted as income under the Means Test. If you consistently earn overtime, this can push your average monthly income above the median, affecting your eligibility for Chapter 7. However, if overtime is irregular, you might be able to argue that it should not be considered in your Means Test calculation, especially if it’s unlikely to continue.

  • If you’re regularly clocking in overtime hours, that extra income can bump up your average monthly earnings. If this pushed income goes above the median for households of your size in the state, you might find yourself ineligible for Chapter 7.
  • However, if your overtime pay is more hit or miss—it’s not consistent and you can’t rely on it every month—you might have a case for arguing that it shouldn’t be fully considered in your Means Test. If it looks like the overtime won’t continue, you can discuss this with your bankruptcy attorney, who can help make the case that your typical earnings are actually lower, possibly keeping the door open for Chapter 7 filing.

So, while overtime can complicate things, it doesn’t automatically disqualify you. It’s all about the bigger picture of your earnings and how they compare to what’s typical in your area.

What Happens If I Recently Lost My Job but Want to File for Bankruptcy?

If you’ve recently lost your job, your reduced income might make it easier to pass the Means Test for Chapter 7.

The Means Test looks at your average monthly income over the 6 months prior to filing. So, if you just lost your job, this recent change might not immediately reflect in your six-month income average. This means your average could still be too high to qualify for Chapter 7 right away.

Because of this, timing can be critical. If you’re in this situation, it might be worth talking with a bankruptcy attorney to help you figure out the best time to file based on your recent income changes so you can maximize your chances of passing the Means Test.

Can Bonuses or Commissions Affect My Eligibility for Chapter 7 in Florida?

Yes, bonuses and commissions are considered part of your income for the Means Test. Like overtime, these can increase your total income, potentially affecting your eligibility for Chapter 7. Consistent or large bonuses and commissions might require you to file for Chapter 13 bankruptcy instead.

In Florida, bonuses and commissions are forms of additional compensation that employees can receive beyond their regular wages or salary.

  • Bonuses are typically one-time payments awarded to employees for various reasons, such as achieving certain performance targets, contributing to company profitability, or as a year-end reward. Bonuses can vary greatly in amount and frequency, depending on the terms set by the employer or as negotiated by the employee. (For example, a holiday bonus or a performance-based bonus given at the end of a successful project are common examples.)
  • Commissions are usually earnings based on the sales an employee generates. They are a common form of compensation in sales-oriented roles where the employee earns a percentage of the sales they make. For example, a real estate agent typically earns a commission based on a percentage of the selling price of properties they handle. Commission structures can be very diverse, sometimes including a base salary plus a commission, or, in some cases, being entirely commission-based.

Both bonuses and commissions are considered taxable income in Florida, just as they are in other states, and must be reported accordingly on tax returns. In the context of employment and income reporting, these forms of compensation are important to consider because they can significantly affect financial assessments, such as loan applications, tax liabilities, and, as mentioned earlier, eligibility for filing Chapter 7 bankruptcy through the Means Test.

Whether they are paid regularly or sporadically, these income sources will be averaged along with the rest of your income over the six months prior to filing for bankruptcy. This total average income is what the Means Test evaluates against the median income for households in Florida of your size.

If you receive substantial or regular bonuses and commissions, they can significantly raise your average income. This might push you over the median income level, making it harder to qualify for Chapter 7, where your debts could be discharged without a repayment plan. In such cases, you might need to consider Chapter 13 bankruptcy instead, where you reorganize your debts and agree to a repayment plan based on your income and ability to pay.

What if I’m Self-Employed? How Do I Report Income for the Means Test in Florida?

If you’re self-employed and considering bankruptcy in Florida, figuring out your income for the Means Test can indeed get a bit tricky. Unlike someone with a regular paycheck, you’ll need to take a few extra steps to accurately report your income.

A picture of Florida Bankruptcy Income & Means Test Guide with Independence Law

You’ll first need to determine your net business income, which is what you’ll use for the Means Test. This involves subtracting your necessary business expenses from your gross income.

Necessary business expenses might include things like rent for your business space, supplies, utilities, and any other costs directly related to running your business. What you’re left with is essentially the income you have available to pay personal expenses and debts.

Here’s what you should do:

  1. Keep thorough records: This cannot be overstressed. Maintain detailed and organized financial records. This includes invoices, receipts, and bank statements. Good record-keeping not only simplifies the process of calculating your net income but also provides the necessary documentation to support your figures during the bankruptcy process.
  2. Calculate your average income: For the Means Test, you’ll need to calculate your average monthly income over the six months before your bankruptcy filing. Add up your net business income for these six months and divide by six. This average is what you’ll compare against the median income for a household of your size in Florida.
  3. Prepare documentation: Because the accuracy of your reported income is crucial for the Means Test, be prepared to provide evidence of both your income and your expenses. This might include profit and loss statements, tax returns, and other financial documents.

Filing for bankruptcy in Florida as a self-employed individual will require you to be meticulous in your preparations. If this process feels overwhelming, consider consulting with a bankruptcy attorney who has experience with self-employed filers. They can ensure you’re using the correct figures for your Means Test, in addition to other important guidance.

Conclusion

Dealing with bankruptcy can certainly be challenging, but remember, it’s designed to provide relief and a fresh start from overwhelming debts. Whether you’re working a 9-to-5, running your own gig, or currently looking for work, understanding how federal and Florida bankruptcy rules apply to you is a critical first step.

If the process feels overwhelming, that’s completely normal. You’re not the first to navigate these waters, and you won’t be the last. Many have found it helpful to seek advice from someone who has helped other Floridians down this road many times—an experienced bankruptcy attorney.

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An experienced bankruptcy lawyer can guide you through the Means Test, discuss what counts as income and what may be exempted, and explain any potential outcomes. Plus, they can handle all the paperwork and negotiations, which can really take the stress off your shoulders.

They can be a real ally, helping you to understand all your options before and during the process and what each step involves.

Remember—while it’s not right for everyone in every situation—considering bankruptcy in the first place is actually a proactive step towards regaining your financial footing.

Consult a Bankruptcy Attorney in the Orlando Area

At The Independence Law Firm, we understand that each person’s financial situation is unique, and we’re committed to providing personalized, knowledgeable guidance to help you overcome your financial challenges.

Whether you’re dealing with wage garnishments, overwhelming debts, or the threat of foreclosure, our experienced attorneys are here to help. We specialize in both Chapter 7 and Chapter 13 bankruptcy and are dedicated to crafting strategies that not only resolve your immediate financial issues but also pave the way for a stable and prosperous future.

We know that filing for bankruptcy is a significant decision, and our team is here to ensure that you feel supported and confident every step of the way. From your initial consultation to the final discharge of debts, we provide compassionate, client-centered support tailored to your specific needs.

Call The Independence Law Firm at 407-755-9705 or contact us by email to discuss how we can help you.

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