The Means Test in Bankruptcy
The means test in bankruptcy was part of the new bankruptcy law (BAPCPA) passed in 2005. It 
is seen as the gateway to Chapter 7 eligibility. It answers the question “Do I Qualify for Bankruptcy?” An individual or couple must enter their income and allowable expenses in an elaborate formula that will indicate whether they have the ability to repay a significant portion of their debt. An individual or couple may not qualify for Chapter 7 if they have the ability to repay a significant portion of their debt after taking into account their income and normal living expenses.
Avoid Bad Advice and Misconceptions
Throughout the industry, there are many misconceptions about the Means Test and its application. There are certain websites where one can purportedly enter their information online and automatically determine if they qualify for a Chapter 7 bankruptcy. I highly advise against relying on this sort of marketing in determining if you actually qualify for bankruptcy relief. The means test is a fluid and ever-changing concept. It’s full of exemptions, exceptions, and turns, and qualifying may be much easier than believed. It takes cooperating with your attorney, working together, and full disclosure to really determine how you’ll qualify.
If you’re looking for a quick “No You Don’t Qualify”, then the various online means test will definitely get you there. If you’re looking for an honest, educated, and experienced opinion, talk to a qualified bankruptcy attorney.
The Very Basics
Generally speaking, and very generally speaking, the means test focuses on two key issues. First, is your income compared to the median income for a family of your size, in your area of the country. Second, if you are above the median income, how much of the unsecured debt could you repay if you filed a Chapter 13 Bankruptcy. This is an over-simplistic explanation of the Means Test, as it is a complicated measure, and should be thoroughly discussed with your, bankruptcy attorney. It should also be noted that not everyone is subject to the means test. The bankruptcy law allows for some exemptions from having to qualify pursuant to the means test.
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