What is the Means Test?

by Johnny Tisdale on February 18, 2013

What is the means test?

What is the Means Test?

The means test is a test used to determine whether an individual or married couple is eligible to file for bankruptcy under Chapter 7. Whether you pass the means test depends on how much disposable income you have. (Disposable income is money left over after your expenses are paid each month.) If you don’t have enough disposable income for a Chapter 13 repayment plan, then you pass the test and may file under Chapter 7. If you do have enough disposable income for a Chapter 13 plan, then you fail the test and must file under Chapter 13.

Means testing was introduced to the bankruptcy system by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. As I’ve mentioned before, this legislation was supported almost exclusively by lenders such as credit card companies. The means test, like virtually everything else in the Act, is more about “abuse prevention” than it is about “consumer protection.” Creditors would rather have a debtor file under Chapter 13 because this reduces the losses suffered by creditors. The idea is that if you have enough money to repay a significant portion of your debts, it would be an abuse of the bankruptcy system to have these debts eliminated.

How do I take the means test?

You take the means test by completing Form 22A of the official bankruptcy documents that must be filed with the court. While filling out this form isn’t rocket science, it definitely would not be the most fun part of your day. Don’t take my word for it; go ahead and click the link to take a look at the form. It is nine pages long and consists of eight grueling parts.

  1. Military and Non-Consumer Debtors
  2. Calculation of Monthly Income for § 707(b)(7) Exclusion
  3. Application of § 707(b)(7) Exclusion
  4. Calculation of Current Monthly Income for § 707(b)(2)
  5. Calculation of Deductions from Income
    1. Deductions under Standards of the Internal Revenue Service (IRS)
    2. Additional Living Expense Deductions
    3. Deductions for Debt Payment
    4. Total Deductions from Income
  6. Determination of § 707(b)(2) Presumption
  7. Additional Expense Claims
  8. Verification

This form reads like an arcane tax document. Fortunately, rather than attempting to complete it on your own, you can hire a bankruptcy attorney to do it for you. You simply hand over the documents that your attorney requests and let them do all the work. Not only does this save you from having to do it yourself, it also ensures that the form is filled out properly. If you’re filing for bankruptcy, you already have enough weight on your shoulders. You’ll be able to rest easier if you don’t have to worry that a mistaken calculation will prevent your bankruptcy from going as smoothly as possible.

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Johnny Tisdale

Paralegal at Dowe Law Firm
Johnny Tisdale is a paralegal, web designer, and writer at the Dowe Law Firm. He earned his BS in psychology and ABA-approved paralegal certificate from Auburn University Montgomery in 2011.

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