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The word “test” never really sparks feelings of excitement and anticipation. Tests usually cause stress, tension and uncertainty. When it comes to bankruptcy, there may come a time for something called a Means Test. New personal bankruptcy laws were passed in 2005 that made it more difficult to file for debt liquidation through Chapter 7 bankruptcy. New laws made it necessary for a debtor to take a means test to determine if he or she is eligible to file under Chapter 7. This test considers gross income over the six months before filing and other factors.

With any test, the more you know and are prepared, the less apprehensive you usually feel. With a Means Test, there is nothing to study for. Instead of preparing by studying, you must be prepared to supply specific information. A debtor must enter income and expense information onto the appropriate form (i.e. the 122A Forms or the 122C Forms) and then make calculations using the information entered.

Some information you will need in order to complete these forms includes debtor’s current monthly income. This information comes from the debtor’s own personal records. However, other information needed to complete the forms comes from the Census Bureau and the Internal Revenue Service.

This bankruptcy “means test” determines if your income is low enough for you to file Chapter 7. It is a formula designed to keep filers with higher incomes from filing for Chapter 7. High-income filers who fail this test may use Chapter 13 bankruptcy to repay a portion of their debts, but may not use Chapter 7 to wipe out their debts altogether.

If you do qualify under the means test it does not necessarily mean you should file, it merely means that you can. Any decision to file for Chapter 7 bankruptcy should be made only after considering alternatives and other factors discussed with a bankruptcy lawyer like George Belche, Attorney at Law.

George R. Belche, Attorney at Law