Many Americans see filing for Chapter 7 bankruptcy as a means to get rid of their high debt burden and restart their financial life on a fresh new slate. However, in order to be eligible for it, individuals have to first pass a bankruptcy means test. In simple terms, it is a formula to determine if your level of income is low enough for filing for bankruptcy. Having inadequate awareness or misconception about the means test, a lot of Americans fail to take advantage of filing for bankruptcy, assuming that they would probably not qualify. In this article, we will be offering a detailed overview of the bankruptcy means test and what it entails.

How it Works

The bankruptcy means test takes into account your current financial condition to check whether you can qualify for a bankruptcy discharge. The whole process can be relatively complicated. However, if your current income is below your state's median income, you are deemed to have passed the test and don't need to complete the rest of it. However, if your present income is higher than the state's median, don't worry, there is still a chance that you might be able to qualify. However, a lot of factors will be taken into consideration in the assessment. Such can typically include your average net income for the last six months, any change to financial status e.g. loss of employment, expenses, and the number of dependents. This is to determine your leftover disposable income; if it is below a certain threshold, you qualify for a Chapter 7 bankruptcy. What is considered ‘disposable income' may vary depending on your location. Each county and metropolitan sets its own cost of living standards which is taken into the calculation to assess the amount.

Getting Started with the Process

To get started, you have to download and fill out a 122A-1 form, which you will have to submit to the court with the rest of your bankruptcy filing papers. You can download the form by clicking here. It is always recommended to fill out the information with the help of a lawyer so that there is less room for mistakes to happen. If your income is found to be above the state median average, you will need to download and fill out a 112A-2 form as well. You will need a completed copy of the first form to fill in the details. You can download the second form by clicking here. It is highly recommended to reach out to a bankruptcy lawyer if you have any questions or confusion regarding the form. Mistakes avoided while filling out the form can save you a lot of hassle later on. Once you have submitted the forms, you'll have to wait for the court decision. If you fail to pass the means test, don't worry, you would still eligible for filing a Chapter 13 bankruptcy, which, while not giving a full discharge, can still make your debt burden more manageable.

Bankruptcy Mean Test Exemption

Dependent on certain conditions, some Americans may not need to pass a bankruptcy means test to become eligible. Disabled veterans meeting certain conditions are exempt from the mean test. In addition, reservists and members of the national guard on active duty may also be granted a temporary exemption. To qualify for an exemption, you will need to fill out and submit a supplement form along with your 122A-1. The form can be downloaded by clicking here.