What is the “Means Test”?

Under The Bankruptcy Reform And Consumer Protection Act of 2005-what we will simply refer to it as the “new law”, you must pass the “means test” in order to qualify for Chapter 7 bankruptcy. What this means is that your monthly income must be below the median income for your state. The median income for your state is the amount that is sort of middle of the road income for a family of your size, whether it is just you or you and a spouse.

We have provided you with the median incomes for each state in your printed materials, and they are accurate as of January 1, 2006. Your income is determined by calculating your income for the six months prior to the filing of your bankruptcy. It does not matter if you are currently making that amount or some kind of attention getting So, if you are unemployed at the time of your bankruptcy filing, but had employment for the six months immediately before, your income will not be zero… it will be the average of the prior six months. Your income includes regular income from all sources except social security, which is not counted in your budget.

Please fill out the income sheet provided with your written materials. Once you have calculated the average of your monthly net income after taxes and deductions for the six months prior to filing…you must compare this to your state’s median income. If your income is greater than the state’s median income-you “fail” the means test and you will likely be required to file a Chapter 13 payment plan, which we will discuss further in a few moments. Now, if your income is less than the state’s median income for your family size, you pass the means test and are able to file for Chapter 7 wipeout.