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What is the means test, and how would it affect me?

The means test is a financial gateway, which you must pass through to safely file for chapter 7 protection. It is found at Bankruptcy Code section 707(b), and supposedly tests for ‘abuse’ of the provisions of chapter 7.  Prior to the extensive 2005 re-write of the Bankruptcy Code at the behest of various deep-pocketed creditor constituencies, there was no limitation on who qualified for chapter 7 relief.

The means test has 2 basic parts: the first part simply compares a made-up number that it calls your ‘current monthly income’ (or “CMI”) against the median family income for your household size in your state; the second part is much more complicated, and only applies if your CMI is above the state median income.

Pass the first part of the means test and you can forget about the second part. Fail the first part of the means test, and you could still qualify for chapter 7 if you can pass the second part. More on the second part of the means test in the next blog post.

Please note: even if you pass the means test, to safely enter the chapter 7 domain the amount of disposable income you have at month’s end should not exceed a certain modest amount. Otherwise, the government overseers of the bankruptcy process may file a motion to force you to convert your case to chapter 13, or alternatively to have your case dismissed.

The process is more than complicated enough to require the assistance of an attorney who practices regularly in this area. More next time.


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