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Definition
The bankruptcy means test is the income calculation that determines whether you're eligible to file Chapter 7 bankruptcy. It was created by the 2005 BAPCPA law to stop higher earners from wiping out debt they could partly repay. The test works in two stages. First, it compares your household income to the state median income for your household size; if you're below that median, you generally pass and can proceed with Chapter 7. If your income is above the median, the test moves to a disposable-income calculation that subtracts allowed expenses to see what you could pay creditors. Depending on that result, you may still qualify for Chapter 7, or you may be steered toward Chapter 13, which involves a repayment plan. Median figures and allowed expenses vary by state and are updated periodically.
Also Known As
Chapter 7 Means Test
BAPCPA Means Test
Bankruptcy Income Test
Median Income Test
Used in Context
- After losing her job, Maria's household income fell below her state median, so she passed the means test and filed Chapter 7.
- A debt-relief intake specialist using Dreamy Leads flagged that the caller's high salary might fail the means test and push him toward Chapter 13.
- His attorney ran the disposable-income calculation because his income was above the median and the first part of the means test didn't clear him.
What happens if I fail the means test?
Failing the means test usually means you can't file Chapter 7. Instead, you're typically steered toward Chapter 13, which sets up a court-approved repayment plan from your disposable income. You may still discharge some debt, but you'll generally repay creditors over several years rather than getting an immediate wipeout.
How is my income measured for the means test?
The test looks at your household income compared to your state's median for your household size. If you're below the median, you generally pass. If you're above it, a disposable-income calculation subtracts allowed expenses to decide eligibility. The exact median and allowable expenses vary by state and are updated over time.
When was the bankruptcy means test created?
The means test was created by the 2005 BAPCPA law. Congress added it to limit Chapter 7 access for higher earners who could repay part of their debt. Before that reform, eligibility wasn't tied to this income-based screening, so the test fundamentally changed how filers qualify today.
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