The Means Test: Can You Pass?


The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) was signed into law by President Bush on April 20, 2005 and took effect on October 17, 2005. Primarily, the law was enacted to prevent individuals from filing Chapter 7 bankruptcy and eliminating their debt when they have the ability to repay all or a portion it.

The law set in place a requirement that everyone must complete a form commonly referred to as the means test. The test is an income based calculation that most debtors must pass to qualify for Chapter 7 bankruptcy. Initially, the test compares the debtor's gross household income, for the previous six completed calendar months, against the median income for the person’s state of residence. If the debtor's income is less than the median, then the debtor has passed the means test. If the debtor's income is greater than the median, then the test continues until a final determination is reached as to her eligibility to file.

In Chapter 13 bankruptcy, repayment cases a similar test is used to determine how much money a debtor is required to pay to unsecured creditors and the minimum length of time of the repayment plan.

Posted in Chapter 7 Bankruptcy

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