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Passing the Means Test

The Means Test is a formula designed to identify debtors that can afford to pay some of their unsecured debts (for instance, credit card debt) and encourage repayment of these debts through a Chapter 13 repayment plan.  Debtors that “fail” the Means Test are disqualified from filing Chapter 7 bankruptcy.

The Means Test is actually two tests.  The first part of determines whether your current monthly income is less than your state’s median income for a household of your size.  The current state median income figures can be found at the U.S. Trustee’s website:

If your family’s income is less than your state’s median income for a family of your size, you PASS the Means Test.  There is no other testing and you can proceed with a Chapter 7 bankruptcy.

If your family’s income is more than your state’s median income, you must complete the Means Test worksheet to calculate if you have (or should have) money to repay unsecured creditors.  In the end if you are able to pay a significant portion of your unsecured debt, you will FAIL the Means Test and cannot file a Chapter 7 bankruptcy.

The truth is that very few debtors fail the Means Test.  Many debtors earn significant incomes and still qualify for Chapter 7 bankruptcy.  Debtors with large monthly secured debt payments (e.g. house, car) often pass the Means Test as there is no extra money at the end of the month to pay unsecured creditors.

If you are contemplating a bankruptcy filing, it is in your best interest to consult with an experienced bankruptcy attorney as soon as practical.  The Means Test is a new and complex feature of the bankruptcy laws, and, consequently, its application and interpretation varies from jurisdiction to jurisdiction.  By examining your case early, a skilled bankruptcy attorney can identify whether you are able to pass the Means Test now or in the future.