Understanding the Means Test in Bankruptcy

Once you have decided that bankruptcy is the most appropriate debt relief solution for you, the first step in determining which type of bankruptcy you qualify for is to take a means test. The means test is a provision of bankruptcy reforms enacted as new federal law in October of 2005.

Do You Need Help to Complete the Means Test?

If you try to initiate a "do-it-yourself" bankruptcy or prepare your bankruptcy petition with a non-attorney adviser, you may be instructed to take the bankruptcy means test on your own, by computer. An online means test can appear deceptively simple, but in fact, there are various technical oddities that puzzle many test takers. There is no substitute for quality advice as you take this important step.

Prescott Pearson & Tande, PA, Can Help

At Prescott Pearson & Tande, PA, we do not tell our clients, "Go take the means test and report back with the results." Rather, we ask clients to bring in seven months' worth of pay stubs and other financial information. We then sit with them and help them fill out each portion of the test online.

What the Means Test Consists Will Tell You

The first portion of the test will compare your income to your state's median income based on the average of your previous six months of gross household income. If you are over the median income you must then complete the second portion of the means test. The second portion of the means test deducts living expenses based on IRS-allowed standard expenses determined by the number of members of your household and other factors. This part of the test will determine whether you can afford to pay 25 percent of your unsecured debts such as credit card bills.

  • You qualify for Chapter 7 bankruptcy if your income is at or below your state's median for your household size, or you are over the median income and are unable to pay 25 percent of your unsecured debt. Some debtors who do not meet the criteria may still qualify for Chapter 7 bankruptcy if they can verify "special circumstances."
  • You may qualify for Chapter 13 bankruptcy if you do not meet the Chapter 7 criteria.

An experienced bankruptcy attorney at Prescott Pearson & Tande, PA, can help you complete the required means test and interpret the results for you in one brief consultation.

Call for a Free Consultation Today

  • Minneapolis-St. Paul Area: 651-968-8096
  • Minnesota Toll Free: 888-366-0827

To learn more about the means test, credit counseling and other key aspects of bankruptcy, call or contact our bankruptcy lawyers online today. We offer free initial consultations, quality services at competitive rates and effective representation statewide.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.