The “Means Test” what does it all mean? The bankruptcy means test is used decide to see who is eligible for a Chapter 7 bankruptcy. People often are worried about the means test, but it is not as bad as it seems. If you make less than the median income for the state, here is a link to the numbers, then you do not have to take the means test. If you make more than the median income for your state, then you need to take the take the means test. If you take, you can still “pass” it and file Chapter 7 bankruptcy.
Before we go into the means test: filing Chapter 13 bankruptcy does not necessarily mean you will pay more than filing Chapter 7. You can reduce your interest rates on cars or cramdown the value in a Chapter 13, more on that here.
What is the means test?
The means test looks at your income (what you made the 6 months before you file – so if you file April 20, 2019, then it is the income you made from October 1, 2018 through March 31, 2019), your expenses, and your debts.
You calculate your gross income using for 122A-1. Click here to download a copy. (You do not have to include any income from social security). If you are above median you have to fill out 122A-2, if you are below median you do not have to fill out 122-A-2 and you can file Chapter 7.
If you are above median, then you will have to fill out 122A-2. When filling it out it takes into consideration the size of your household. The bigger your household the larger your deductions will be for housing, food, etc. You can deduct health care cost, if you are older than 65, then you can deduct more for healthcare expenses. Next you can deduct housing costs the cost for owning and operating your vehicles. You can also subtract out payroll deductions and other deductions. Once you get to the end, you will have to crunch the numbers and see if you pass.
Crunching the Numbers
If your income is less than the state median, the means test is relatively straightforward. For those with higher incomes, however, the means test is quite complex. Not only will you have to do pages of calculations, but you’ll have to find the correct income and expense figures for your area and household size. To find the figures, you’ll start by going to the U.S. Court’s means testing page. In the box entitled “Data Required for Completing the 122A Forms and the 122C Forms,” select the most recent time period and click “Go.” It will take you to a page with links to your state’s median income, as well as the state and national standards for food, housing, and other expenses. For example, to find a state-by-state median income chart, click on “Median Family Income Based on State/Territory and Family Size.”
Best of luck. If you need help, feel free to set up a free consultation with a bankruptcy lawyer in North Little Rock.