The means test for Chapter 7 is the last of the bankruptcy documents, but should be considered first.
The means test determines whether you are eligible for Chapter 7, which is the type of bankruptcy that most debtors prefer to file. Chapter 7 is fast, straightforward, and eliminates most of your debt. If you are not eligible for Chapter 7, you must file under Chapter 13, where you will make partial payments on your debts for 3 to 5 years.
Chapter 7’s means test does not apply if you are a disabled veteran or if more than 50% of your outstanding debts are business debts. In either case, you are automatically eligible to file under Chapter 7.
In a nutshell, the means test assesses whether your household income over the last six calendar months exceeds median income for a household the size of yours.
Household size is essentially determined by “heads on beds,” or how many relatives live under your roof. However, if any of those relatives earns an income, that income must be added to yours to determine your household income.
The means test allows adjustment for expenses, so can be complicated. If you want help assessing whether you are eligible to file under Chapter 7, be sure to contact a bankruptcy attorney in your state. NACBA is a good place to start if you’re looking for a bankruptcy attorney.