What is the means test in a Chapter 7 bankruptcy?

After the 2005 amendment of the Bankruptcy Code, anyone seeking to file a Chapter 7 bankruptcy must complete the “Means Test” to determine, in part, whether they qualify to file a Chapter 7 bankruptcy.

The first part of the Means Test compares your household annual income to that of the State of Alabama median income for a household of the same size. If your income is below the median income in Alabama, then normally you will pass the Means Test.

However, if your income is greater than the median income in Alabama, then you must complete further parts of the Means Test that take into consideration different monthly expenditures included housing, transportation, utilities, domestic support payments, etc.

In the event you do not pass the Means Test and you will not qualify to file a Chapter 7 bankruptcy, you may want to consider a Chapter 13 bankruptcy, depending on the your unique situation.

Leave a Comment