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What is the purpose of the bankruptcy means test?

Most individual bankruptcy filers will have an initial goal of filing for Chapter 7 bankruptcy. This is because this chapter makes it possible for a significant number of debts to be written off, and it does not require committing to a lengthy repayment plan. In this way, Chapter 7 bankruptcy offers debtors with the opportunity to gain a fresh financial start.

However, not everyone can file for Chapter 7 bankruptcy. Since October 2005, it has been mandatory for all debtors to undergo a bankruptcy means test in order to qualify for Chapter 7 bankruptcy.

Why is the means test in place?

The bankruptcy means test is in place to make sure that debtors do not abuse the system. Those with the financial means to pay back some or all of their debts should be doing so in a Chapter 13 repayment plan.

What does the means test measure?

The Chapter 7 bankruptcy means test measures a debtor's income and financial means. The assessment will measure all income, including pensions, child support and other benefits.

What can I do if I fail the means test?

If you fail the means test, you still have the possibility to file for bankruptcy. You may want to look into the possibility of filing for Chapter 13 bankruptcy. If you believe that the Chapter 7 means test used inaccurate information or if your circumstances have changed, you may want to appeal the application.

In order to be prepared, is important that you understand whether you are likely to be eligible for Chapter 7 bankruptcy before taking action to do so.

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