What is the Means Test?

In 2005, the US Bankruptcy Code was amended to incorporate a means test. The design of the means test is to establish a way to ensure that those who can afford to pay back a portion of their debt are ineligible to file a Chapter 7 bankruptcy.

The means test is a complex mathematical process that determines basic eligibility based upon income. The test involves taking the debtor's current monthly income. This number is determined by looking at the previous 6 months worth of income prior to the date of filing the case. This is different from Chapter 7 bankruptcy prior to the 2005 amendments because it takes a larger view of the debtor's situation prior to filing.

Once this number is figured out, it is cross-referenced with the amount mandated by state median levels. If it is above this number, you will need to continue with the means test, filling in various deductions to see if you qualify for the Chapter 7 bankruptcy or instead will need to file a Chapter 13. If it is below, then you do not need to continue with the means test and you are qualified for the Chapter 7 bankruptcy.

Of course, because the means test is complicated, you will want to consult your bankruptcy attorney in the process. The means test is now a basic component of nearly every bankruptcy case, so speaking with your attorney is necessary to a successful result in your case.