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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.

The bankruptcy means test involves a two-step process:

monthly income

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.

The bankruptcy means test serves several important purposes:


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