What is the Means Test?
The means test is one vehicle for determining an individual's eligibility for filing Chapter 7 bankruptcy. The means test also is the starting point for calculating a Chapter 13 plan payment. The means test was among the numerous changes to the United States Bankruptcy Code passed by the United States Congress in 2005. The means test is not applicable in non-consumer bankruptcy cases. A non-consumer bankruptcy case is a case where over 50% of an individual's debt is business, investment or other non-consumer debt.
The means test is a form completed in consumer bankruptcy cases.
The means test calculates your monthly income based on a wide array of income earned over a 6 month period prior to filing your bankruptcy case.
If your 6-month gross income (multiplied by 2) is less than the median income for your family size, then you "pass" the means test and may qualify for a Chapter 7 filing. If you choose to file a Chapter 13 case, an individual who's means test income is below the median income may propose a plan in which no unsecured debt is repaid. However, unsecured debt repayment in Chapter 13 is now based primarily on current disposable income which is listed in Schedules I and J, respectively.
However, if your income exceeds the median income in Washington State, you're your annualized income is divided by 12 and deductions for living expenses are subtracted from the monthly income.
If, after deducting expenses from income, the figure is greater than zero (i.e. income exceeds expenses) then Chapter 7 may not likely be a viable option. However, if the monthly income figure is zero or negative (i.e. expenses exceed income), then you may be eligible for a Chapter 7 filing.
Please note, the means test is merely one test in making the determination whether to file a Chapter 7 bankruptcy case. It is very important to discuss your case with an experienced bankruptcy attorney who can properly advise you of your options.
Various other factors such as assets, financial dealings, and intentions on secured debt (i.e. whether you want to retain a home or car) are also taken into consideration when determining whether a Chapter 7 filing is appropriate.
In order to determine your legal options, it is important that you carefully complete the Chapter 7 means test linked here. This is in word document form for your convenience.
Once complete, please contact our office at (206) 442-9500 to schedule an appointment so we can perform the actual means test for you. Please be careful about attempting to perform the means test using an online form. This can lead to potentially negative consequences for your bankruptcy case.