What is the Means Test and How Does it Determine Bankruptcy Eligibility?

What is the Means Test?

The means test helps in determining eligibility for Chapter 7 bankruptcy by reviewing personal income. Chapter 7 has specific income requirements that must be met in order to file. If you are determined to be in a higher income bracket, you’ll likely be eligible to file Chapter 13 bankruptcy .

The means test reviews your income and gets an idea of what expenses you have on a monthly basis. Even if you make a substantial amount of income, you may still qualify for Chapter 7 if you have an extensive list of expenses or certain expenses are high every month such as your mortgage. The purpose of the means test is basically to limit the use of Chapter 7 to those who qualify.

The income median amount is based on the state you live in. The test will show if you are above or below the median amount. If you are over the median amount, you’ll have to determine if you will have any income left to put toward outstanding debt. The income that is left over after paying expenses is considered disposable income. Usually, if your disposable amount adds up to be more than a certain amount, it’s likely you’ll be unable to file Chapter 7.

Additional factors such as your total household income, family size and other categories such as expenses and necessities are also reviewed to determine bankruptcy eligibility. If you do not qualify to discharge debt under a Chapter 7, you may be able to restructure debt under Chapter 13. Questions or concerns should be reviewed with a bankruptcy attorney .