Demystifying The Means Test


Many people are frightened about pursuing a bankruptcy even though their financial position demands immediate attention. One element of the bankruptcy process that confuses and frightens people is the means test.

Fear and confusion serve to keep people thinking that bankruptcy is not available to them, which is a huge obstacle to getting the help they need. People often convince themselves they are not eligible for bankruptcy before speaking with an attorney.

One such false belief many people have is that they believe they cannot file bankruptcy if they are employed. Just because you have an income does not mean that you will fail the means test.

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These sorts of mythical beliefs about bankruptcy need to be fought because too many people struggle for too long before getting the help they need.

You do not have to be homeless and unemployed to consider bankruptcy. It is important to understand that we determine whether you need to take the means test by adding up your gross income over the 6 months prior to filing.

This includes money you have received from employment, a business, unemployment, social security or any support from family. For most people, this will be the end of the calculation.

If your gross income for the past 6 months is below the median income for your family size in the state you live in, then you do not have to take the means test. You will be eligible for Chapter 7 relief, unless some other reason blocks you.

You can locate your state's median income here.

One thing you should notice is that the median income increases depending upon your family size. So if you live in Washington and make $55,000 per year, you might think you are over the median. If you have a wife and two kids to support, however, you would fall under the median.

Some people think that if they recently got a job making $90,000 per year, then this puts them over the median and makes them ineligible for bankruptcy. Remember that the court only looks at the six months prior to filing in determining whether or not you need to take the means test.

So if you only recently started making money, the last 6 months quite possibly show you are not over the median. It is imperative that a person in that situation speaks with an attorney so they can best take advantage of their rights.

If you are over the median income for your state, then you will have to take the means test. It does not mean you are ineligible for bankruptcy as many people who take the means test are able to pass it.

The court will look to how much you make and what deductions you claim. There are deductions allowed for housing, taxes, car payments, health insurance, retirement accounts and many others that can be claimed in an effort to pass the means test.

Do not let false beliefs stop you from seeking the relief you need to get a fresh start.


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