Measures In A Means Test

Filing for bankruptcy requires some time and patience. There are several “hoops” to jump through from qualifying to completion, all of which is guided by some very specific rules.  One of the first of these hoops is the means test in Chapter 7 bankruptcies.

Determining Eligibility

When filing for Chapter 7 bankruptcy, you will be required to pass a means test. This is a test to determine whether you, as an individual or couple, are eligible to receive help under the Chapter 7 Bankruptcy Code. The purpose of this test is to evaluate whether your income and assets are insufficient enough to adequately repay your debt obligations. If you do pass the test, you may file for Chapter 7; otherwise you may be required to seek help under Chapter 13 of the Bankruptcy Code.

In order to determine your eligibility, the test evaluates several factors against the median income level of your state. The calculation of your income level is made up of several basic components, such as:

• The number of persons in your household
• Your zip code
• Your total debt load, or total amount of debt you owe creditors
• Your gross monthly income

All of these factors are taken into consideration when determining your eligibility. There is no set rule for qualification because any change to these components could change your eligibility. For example, a family of three living making $60,000 a year that reside in a specific zip code, with a $20,000 debt burden, could be more eligible than a single person with the same demographics.