• The bankruptcy means test is a calculation used to determine your hypothetical “monthly disposable income.”
  • The amount of monthly disposable income will in turn help decide whether you file Chapter 7 or Chapter 13 bankruptcy.
  • This disposable income helps determine (1) whether you are eligible to file Chapter 7, and (2) how much you pay your creditors if you file Chapter 13.
  • Below are the basic steps in the Means Test Analysis.

[warning_box]Note: You can skip the means test analysis if you are (1) a disabled veteran whose debts were incurred during active duty or (2) your debts are primarily non-consumer debts.[/warning_box]

Means Test Step (1):  Compare your total monthly income to the median income in your state

  1. Determine your whether your “current monthly income” is higher than the median income for a household the same size as yours in your state.
  2. Your “current monthly income” is your average monthly household income over the six months prior to your bankruptcy filing.
    • What is included in  “average monthly household income”?  That’s a good question.  You may need to look to the case law in your jurisdiction to be sure you are calculating it correctly.  It is a good idea to consult an attorney.
  3. If your income is less than or equal to the median income for a household the same size as yours in your state, you are presumed to be eligible to file Chapter 7 bankruptcy.
  4. If your income is more than the median, you must proceed to the next step…the full “means test.”

Means Test Step (2): If Necessary, Take the Full Means Test

  1. If your average monthly income for the six-month period prior to filing is higher than the median income for a household the same size as yours in your state, you need to take the “full” means test to determine if you are presumed to be eligible to file Chapter 7 bankruptcy.
  2. While there are several means test calculators available on the internet, many of them are not reliable.
  3. When completing the means test, it is very important to be sure you disclose ALL expenses and income.
  4. Sometimes people are embarrassed of high expenses and will try to minimize them.  But, disclosing all expenses can help you qualify to file a Chapter 7 bankruptcy.
  5. While the means test uses defined, “set” amounts for some expenses, you are allowed to deduct your actual expenses for other items.

Means Test Step (3):  What if I “Failed” the Means Test?

  1. If the Means Test seems to show that you have too much disposable income to file Chapter 7, this only establishes a presumption.
  2. If you have extraordinary circumstances, you may be able to overcome this presumption and establish your eligibility to file a Chapter 7 bankruptcy and receive a discharge.
  3. Even if you are filing Chapter 13, you want to be sure your means test calculation is as accurate as possible.  The means test calculation will help determine how much you are expected to pay your creditors during your Chapter 13 payment plan.

[warning_box]Again: if you think you are ineligible to file Chapter 7 because of the means test, be sure to consult an attorney. You may not be taking your full situation into account when doing the calculation, and / or you may be able to overcome a presumption of ineligibility.[/warning_box]

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