Bankruptcy Means Test

The Bankruptcy Means Test & Your Eligibility

The Bankruptcy Means Test, otherwise known at the Chapter 7 Means Test, helps you determine whether you qualify for Chapter 13 or Chapter 7 bankruptcy.  To find out whether you pass the bankruptcy means test, you subtract certain allowed expenses and debt payments from your current monthly income. This test shows you whether you have enough disposable income to make payments on a Chapter 13 plan. If the income that’s left over after these calculations is below a certain amount, you can still file for Chapter 7.

Do You Qualify For Chapter 7?

The means test was statutorily created to determine whether a petitioner qualifies for Chapter 7 or has sufficient disposable income to make repay debts via a Chapter 13 plan. To calculate whether you pass the means test, you subtract certain allowed expenses, as determined by IRS guidelines for the area you live, and debt payments from your current monthly income. Current monthly income is calculated by the six previously completed months of gross income received before case filing. If the income that’s left over after these calculations is below a certain amount, you can file for Chapter 7. Although the calculations sound simple, a skilled bankruptcy attorney is needed to navigate the means test and ensure that every allowed deduction is taken.

Is Your Household Below Median Income?

If a household’s income in the six months preceding the filing is below the median income, as determined by the IRS, for that household size, then the means test requires no further calculation. A person or household is then allowed to file Chapter 7 or a three-year Chapter 13.

In the event that the household’s income is greater than the median, a long-form means test must be completed. If the means test is passed, Chapter 7 is an available option. If the means test is not passed, a five-year Chapter 13 is required.

Consult with Experienced Counsel

The means test, and its deductions, are subject to judicial interpretation and are ever evolving. The Law Office of Hindley and Henderson stays on top of these changes providing our clients the best chance of passing the means test.

Pre-bankruptcy planning, timing the filing of the bankruptcy, and a thorough review of clients’ expenses are necessary and are all part of the services we offer. The 2005 reform of the bankruptcy laws, including the creation of the means test, have made bankruptcy law much more complicated. Experienced and effective counsel makes a difference. Contact us for a Free Initial Consultation and to discuss whether you will be eligible to file for Chapter 7.

In Chapter 7 cases with primarily business debt, as opposed to consumer debt, the means test is not required.

The Bankruptcy Means Test Calculator

If you’re looking for further information to determine your eligibility under the means test, use this online means test calculator, created by the applicable income and expense standards for your state, county, and region to determine your eligibility.

Department of Justice Median Income Table

Department of Justice –  Means Testing

United States Courts – Means Test Forms