The Means Test helps in determining eligibility for bankruptcy. The test gives a general idea of whether or not you have the ability to pay on outstanding debt. Depending on the income requirements for your state the test provides details on which bankruptcy chapter you may qualify for; Chapter 7 or Chapter 13 bankruptcy. The Means Test looks at household income along with expenses and debt.
The following types of income are likely to be reviewed on the Means Test: self-employment, family support, child support, alimony, wages/tips (W2), trust accounts, 401k, IRA, unemployment, pensions, life insurance withdrawals and income from rental properties.
Most income is considered for the test but Social Security Income or income that falls under the federal Social Security Act may not be considered. Yet, when you file bankruptcy it is important to report all income the household earns. Each state has a median income amount that varies depending on household size. Your household size includes those who are members of your family or anyone who resides in the home.
If you fear you make too much money there are deductions that may help you meet median income qualifications. Such deductions may include insurance premiums, medical insurance, paycheck deductions, charitable donations and more. The Means Test will review earned income for the past 6 months. If you are self-employed you would provide profit and loss data to determine eligibility. Questions and concerns about bankruptcy qualifications should be discussed with a legal expert.
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