In 2005, Congress amended the Bankruptcy Code to include what is now commonly referred as the means test.  The means test is the analysis that is required to determine whether a potential debtor qualifies for Chapter 7 relief or Chapter 13 relief, and even though it is called a test, it is not as simple as filling out a questionnaire to determine the result.

That said, don’t fill out an online means test – chances are the results are wrong, and it may mislead you into thinking no relief is available for you, or that you are qualified to file, when really you are not.  This post will discuss the three step system that the means test uses.

1.  The first step is to determine your income for the last 6 months.  That is all that is relevant…. it doesn’t matter if you made 200K in 2009, if you didn’t make any money in the last 6 months… It is backwards looking, but only to an extent.  The relevant time period is the 6 months prior to filing, not including the month that you are filing in.  So, if you were to file in February, we are looking at August 2009 through January 2010. Once your total gross income for the last 6 months has been determined, you multiply it by 2, to give you a yearly average.  Then you compare your yearly average with the median household income for a household of your size in the county you live in.  This number is determined by the IRS, and the most current listing can be found at

2. If you are under the median household income you qualify for relief under Chapter 7.  You can still file a Chapter 13, provided you have disposable income at the end of the month to make your plan payment, and, if you do go the Chapter 13 route, you have the option of making your plan only 3 years long (instead of the otherwise mandatory 5 years).  Now, typically this is not a problem, but you also need to review your current income and expenses – the expected future numbers so to speak:  If you have a lot of money left over at the end of the month, the US Trustee may argue that you have the ability to repay some of your debts, and your slam dunk 7 gets itself in some trouble.  Your attorney will review this numbers and check the likelihood of a problem for you BEFORE filing, so you know what is ahead.  In my experience, those with an income that is less than the median household income hardly ever run into that problem.  Nevertheless, I always check.

Now, if you are OVER the median household income for a household of your size, not all is lost.  The second step of the means test comes into play, and you may still qualify for Chapter 7.  More on that in my next post.