Free Consultation CALL TODAY:480-656-8333
Free Consultation 480-656-8333

Understanding the Bankruptcy Means Test

Assessing Eligibility for Chapter 7 Bankruptcy


The bankruptcy means test is a fundamental component of the U.S. bankruptcy system, specifically designed to determine whether individuals or families are eligible to file for Chapter 7 bankruptcy. It plays a crucial role in evaluating a debtor’s financial situation and their ability to repay their debts. In this article, we will explore what the bankruptcy means test is, how it works, and its significance in the bankruptcy process.

What is the Bankruptcy Means Test?

The bankruptcy means test is a financial assessment used to establish eligibility for Chapter 7 bankruptcy, which is often referred to as “liquidation bankruptcy.” Chapter 7 bankruptcy allows individuals to discharge most of their unsecured debts, such as credit card debts and medical bills, providing them with a fresh financial start. However, not everyone qualifies for Chapter 7, and the means test helps determine eligibility.

How Does the Means Test Work?

The bankruptcy means test involves a two-step process:

Calculating Current Monthly Income (CMI)

The first step is to calculate your Current Monthly Income (CMI). CMI includes your average monthly income over the six months preceding your bankruptcy filing. It encompasses various sources of income, such as wages, self-employment income, rental income, and more. Certain income sources, such as Social Security benefits, are typically excluded.

Comparing CMI to the Median Income

on the second step, your CMI is compared to the median income for a household of similar size in your state. If your CMI is below the median income, you typically pass the means test and qualify for Chapter 7 bankruptcy. If your CMI is above the median income, further analysis is required to determine your eligibility.

For those with CMI above the median income, additional expenses and deductions are considered, including housing costs, transportation, and child care expenses. These deductions can lower your disposable income, which, if low enough, may still allow you to qualify for Chapter 7 bankruptcy.

Significance of the Bankruptcy Means Test

The bankruptcy means test serves several important purposes:

Equity Among Debtors:

It ensures that individuals with the financial means to repay a portion of their debts are directed towards Chapter 13 bankruptcy, where a repayment plan is established. This helps maintain fairness and equity in the bankruptcy process.

Guiding Debtors Toward the Right Chapter

It helps debtors determine the most appropriate bankruptcy chapter based on their financial situation, allowing them to choose the path that best suits their needs.

Protection of Vulnerable Debtors

The means test aims to prevent abuse of the Chapter 7 bankruptcy process by those who have the ability to pay their debts.

The bankruptcy means test is a critical element in the bankruptcy process, providing a framework for assessing eligibility for Chapter 7 bankruptcy. It ensures that those who genuinely need debt relief through liquidation can access it while directing debtors with the ability to repay towards structured repayment plans in Chapter 13 bankruptcy. If you are considering bankruptcy, consult with an experienced bankruptcy attorney who can guide you through the means test and help you make the best decision for your financial future. Understanding the means test and its implications is essential for navigating the complexities of bankruptcy law.

– Benjamin L. Dodge


Leagl Issue You Need Help With

Mesa Office

7227 E. Baseline Road,
Suite 109,
Mesa, AZ 85209

Tucson Office

7227 E. Baseline Road,
Suite 109,
Mesa, AZ 85209

Phoenix Office

7227 E. Baseline Road,
Suite 109,
Mesa, AZ 85209

Located in  Mesa, the law firm of Dodge & Vega PLC. represents clients throughout Arizona, including, but not limited to the cities of: Mesa, Gilbert, Phoenix, Scottsdale, Chandler, Tempe, Glendale, Surprise, Paradise Valley, Sun City, Litchfield Park, Fountain Hills, Casa Grande, and Tucson.


The information contained in this website is for general information purposes only. The information is provided by Dodge & Vega and while we endeavor to keep the information up to date and correct, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the website or the information, products, services, or related graphics contained on the website for any purpose. Any reliance you place on such information is therefore strictly at your own risk.