The Bankruptcy Means Test

The bankruptcy means test, as it is known, was part of the new bankruptcy laws of 2005. In order to file Chapter 7, you’ll need to pass the means test.
The good news is, the means test is not an actual exam. It is a measurement of “true need,” and a bankruptcy lawyer can take you through the test and, in short order, let you know if you qualify.
Basically, it works by taking into account your income, your debt and the size of your family, to determine if you truly do need Chapter 7 bankruptcy.
This may sound intimidating, but it’s not designed to be the roadblock it may seem. The means test is in place to prevent people from taking advantage of the system. That’s a testament to the power of Chapter 7 bankruptcy.

How the bankruptcy means test works

While the specifics of the means test vary from state-to-state, the workings are the same.
Generally speaking, if you earn less than the median annual income in your state, you should qualify for Chapter 7 bankruptcy.
The median income is the center-line of all annual incomes in the state. It is unique to each state, and includes different income levels based on the size of your family. For example, for means test purposes, the median income for a family of four is typically higher than that for a family of two.
Also, the median income for the means test changes every year in every state.
This may sound like a high bar, but more people may qualify than you think. In most states, the median income for 2009 was between $40,000 and 50,000 for a single earner. For a four-person family, the median income was above $70,000 for many states in 2009.
To find out if you qualify for Chapter 7 bankruptcy, and to learn more about how filing for bankruptcy can impact your debt, speak with a local bankruptcy lawyer.