Under amendments to bankruptcy law, effective October, 2005, a two-part test is applied to determine if a debtor qualifies for Chapter 7 bankruptcy:
1. Determination of Ability to Repay - The debtor's income is examined under a formula which exempts certain necessary expenses, such as food and rent, to determine if the debtor will be able to repay 25% of his or her "nonpriority unsecured debt".
2. Comparison to State Median Income - The debtor's income is compared to the median state income.
If the debtor earns in excess of the state median income, and is able to repay 25% of his or her "nonpriority unsecured debt", the debtor will be ineligible for Chapter 7 protection and must proceed under Chapter 13.