The “means test” is a computation designed to determine whether some higher-income bankruptcy filers should be forced to file a Chapter 13 plan rather than a Chapter 7 plan. This means that some higher-income people who fail the means test may not have the choice to file a Chapter 7 bankruptcy case.
While the means test prevents some high-income people from filing for bankruptcy under Chapter 7, most people filing for bankruptcy either do not need to take the means test, or pass the means test and can file a Chapter 7 bankruptcy case anyway.
Any person filing for bankruptcy who earns less income than the median state income for the state in which he lives, adjusted for the number of dependents in his household, does not need to take the means test. In other words, if you make less than the median income for your state, adjusted for the number of your dependents (children, elderly grandmother, etc.), then the means test will not prevent you from filing a Chapter 7 bankruptcy case. There are many other factors you may have to meet to file a Chapter 7 bankruptcy case, but the means test will not present a problem for you. However, if you earn more income than the state median, then you must proceed to the second step and see if you pass the means test.
The actual means test calculation is very complex and is beyond the scope of this article, but the simple way of looking at the test is to compare your total income from all sources with your total expenses and see if there is anything left at the end of the month. In other words, if you are a high-income filer, but you have almost no money left at the end of every month after paying your reasonable expenses, then you might pass the means test and be eligible to file Chapter 7 bankruptcy. However, if you have a lot of money left after paying your expenses, then it is likely that you will not pass the means test. If you fall into this second category of people, it is highly-advised that you consult with a lawyer, as there are legal arguments that can still be made on your behalf should you choose to file a Chapter 7 bankruptcy case. It should be noted that you can still file for bankruptcy under Chapter 13 even if you do not pass the means test.
