What
is the means test?
You may have read that the new bankruptcy law imposes a "means
test" on who can file for Chapter 7 bankruptcy.
You might think this new test will prevent you from filing. But, chances
are, you're wrong. Most people considering bankruptcy have no trouble
passing the means test. Indeed, some lawyers think more people
will qualify for Chapter 7 under this test than under the old law, where
judges had no fixed formula.
Use this calculator find out where you stand.
The Formula
The law now uses a standard mathematical formula to determine whether
you can file for Chapter 7 -- or, to put it in legal terms, whether filing
for Chapter 7 would be an 'abuse' of the bankruptcy system. (Those who
fail the means test, are left with a Chapter 13 repayment plan as their
only bankruptcy option.)
The means test is actually a two-part test and you only need to pass
one of them to qualify for Chapter 7.
Test 1. "Median Income"
This is a very simple test that compares your average household
income for the past six calendar months to the median income for your
state, If your income is below the median, you qualify for Chapter 7.
If it is above the median, you must pass Test 2.
Test 2. "Disposable Income"
This test deducts expenses from your income to determine how much you
can pay your unsecured creditors over the next five years:
- If you can pay at least $10,950 ($182.50 per month), you can't file
for Chapter 7.
- If you can pay at least $6,575 ( about $110 per month) and that is at least
25% of what you currently owe your unsecured creditors, you can't file
for Chapter 7.
- If your disposable income is less than $110 per month, you can file
for Chapter 7.
Certain deductions are standard allowances based on the number of vehicles
you operate, the number of people in your household, and the cost of
living in Maricopa County.
In addition, to these standard deductions, you can also deduct the full
amount of certain actual expenses such as mortgage and vehicle
loan payments.

Do
I need to complete the means test?
If you are filing for Chapter 13 bankruptcy, you do not need to complete
the means test. However, you do need to complete a form almost
identical to it — and that will determine how much you must pay
in a Chapter 13 plan.
If you want to file for Chapter 7 bankruptcy, you must at least complete
the first part of the form to figure your "current monthly income" (CMI),
which is based on your average income over the past six calendar months.
That number will determine whether you must complete the rest of the
form.
If your CMI is below the median income for Arizona for a household your size, then you do not need to complete
the means test.
If your CMI is higher than the median for Arizona for a household your size, you must complete the means test
to compute your monthly "disposable" income (that is, income
minus expenses). The result of that computation will determine whether
you are eligible for Chapter 7 bankruptcy.
How
long does this take?
Using this calculator takes about 20 minutes. For some, the answer may
be obvious after only a few questions.
Is it private?
This calculator is completely anonymous. We do not ask -- and no not
want -- any personally identifying information linking you to these numbers,
other than a zip code. We do keep statistical data on amounts that user
have entered, so that the site may monitor the needs of its users and
adjust services accordingly. However, To us, this is data for statistical
analysis only. For more information. See the privacy
notice.
Garbage in, garbage out
If you don't put in the correct numbers in the correct blanks, this
calculator won't give you an accurate result. It only does the math.
It is your responsibility to put the right numbers in the right blanks.
Helpful resources are available throughout the test to help you figure
out what the form is asking for and what to put where.
Be sure to account for all the different kinds of income you receive.
If you're not sure what to put in an 'expense' blank, skip it. You may
find that it doesn't' matter -- that is, you may qualify regardless of
what number you put in that blank.
If you need assistance, this website has listing of books and
local services that offer bankruptcy help.
Where to find the Official Means Test form
If you end up actually filing for Chapter 7 bankruptcy you need to fill
out official
form (22A). which you can find here.
This calculator is based on that form.
Household
Size: When is a family of 3 not a family of 3?
This is a topic that has been discussed in various blogs here and here.
The issue of household size can be tricky in cases of shared custody,
children who live at college part of the year, or non-custodial children
living in the household.
There will undoubtedly be litigation on this subject. The official form
seems to suggest that the issue is whether the person is part of the
household and is a dependent. (That is, you can't include a roommate
who is not your dependent in your household size, yet you may have to
include the portion of their income that contributes to the overall income
of the household. See the help topic on that subject. This can be an
issue for same-sex couples who cannot legally marry.)

Contributions
of roommates or domestic partners to household income
At least one site on the web has addressed this issue. King's Bankruptcy
Media (a lawyer's website) states what appears to be the correct rule:
that, if a roommate or domestic partner is contributing income to the
household, then that portion of the roommate's income must be included
in the overall amount of 'household income' on line
8 of the official form, where it asks for "contributions to
household income."

Other
Noteworthy Calculators on the Web
CNN/Money
Magazine's Budget Calculator compares your monthly expenses to
national averages for people with your income and home situation. It's
not localized by location.
The bankruptcy court for the Middle
District of Florida provides an
Excel worksheet of a means
test calculator, but it only has figures for
counties in that Florida district.
ChooseToSave.org offers
an extensive list of calculators for all types of financial decisions
including car loans, credit cards, college savings, to retirement savings
options.

If
I Pass the Means Test, Can I still be barred from filing bankruptcy?
Yes, you can still be barred from filing Chapter 7 bankruptcy.
Passing
the means test removes one barrier:
it means that you are not "presumed" to
be "abusing" the
bankruptcy system. It is an essential first step, and for most people,
that is that. They are clear to file.
However, in some cases, a bankruptcy judge may rule that you're abusing
the system based on other conduct that has been brought to the court's
attention. See the examples below
Example 1: In Iowa, a judge ruled that a debtor was abusing
the system because in the year preceding his bankruptcy, he received
substantial sums of money from various sources and spent it all on unnecessary
indulgences, rather than pay down his debt. In
re James, 345 B.R. 664 (Bkrtcy.N.D.Iowa 2006).
Example 2: In another example, a Northern California court
denied a debtor the right to file Chapter 7 because the debtor was about
to have a substantial increase in income. In re Pak, 343 B.R.
239 (Bkrtcy.N.D.Cal. 2006).
Other courts have ruled just the opposite
-- that the new law prevents them from looking at anything other than
the income six months prior to filing. See. e.g., In re Rotunda,
(Bkrtcy.N.D.N.Y.) (chapter 13 plan approved based on income for six
months prior to filing).
The
debate remains unresolved as of this writing (October 2006).
For more information see, Morgan
King's Guide to Bankruptcy Practice (Question #26) and Kevin
Chern's Bankruptcy
Lawyer's Blog.

If
I fail the Means Test, can a judge allow me to
file anyway?
Yes, a judge can allow you to file for Chapter 7 bankruptcy even if
you fail the means test, but only you are able able to show "special
circumstances."
Some examples of possible "special circumstances" are job loss or pay
cut, a serious medical condition, or unusually high child care expenses. You
must be able to produce proof of your expenses and that your expenses
are reasonable -- and that you have no reasonable alternative.

What
are "priority claims"?
This is a technical term used in bankruptcy law. A list of the most
common priority claims can be found on Form
10 (Proof of Claim). These
include
- past due debts for child and spousal support,
- most unpaid
taxes, and wages,
- salaries or commissions you owe to employees and
- contributions you owe to an employee benefit fund.
The full list of the nine types of
priority debt is found in section 507(a) of the bankruptcy code. 
ADVERTISEMENTS - Services listed in advertisements are not endorsed or reviewed by LegalConsumer.com
Want to talk to a local bankruptcy lawyer right away?
Total Bankruptcy can connect you with a bankruptcy attorney near you. Fill out the evaluation form or call (877) 257-9043.
About Total Bankruptcy
Total Bankruptcy is sponsored by consumer bankruptcy attorneys from across the country, and provides hundreds of pages of free consumer bankruptcy information, articles, blog posts, and other resources on its website at www.TotalBankruptcy.com. Total Bankruptcy's President, Kevin Chern, is the former managing partner of the largest consumer bankruptcy law firm in the United States, and has personally filed thousands of consumer bankruptcy cases.
Although Total Bankruptcy provides extensive free information about Chapter 7 and Chapter 13 bankruptcy and regular updates on bankruptcy news and developments, many consumers need help understanding how the bankruptcy laws apply in their particular circumstances and making good decisions about their next steps. A consumer bankruptcy attorney may be the best source of that information, so Total Bankruptcy makes it easy for consumers by scheduling free, no-obligation calls with local bankruptcy attorneys.
Welcome, users of Nolo's
LegalConsumer.com helps you find local information and services
to help you file for bankruptcy.
If you don't own the book, you can still use this site and
the free means test calculator.
Don't own a copy?
Learn more...
How to File For Chapter 7 Bankruptcy (Nolo, 16th ed, 2009)
- Designed to be "your legal companion" as you go
through the bankruptcy process under the new laws.
- Takes you
through the process of filing and explains the impact of the new
bankruptcy laws.
- Step-by-step instructions cover the nuts and bolts
of how to prepare and file each form, and alert you to situations
that require a lawyer.
In Paperback and eBook (Adobe Reader)
Pub. Date: Oct 2009
Edition: 16th
Pages: 576 pp
ISBN: 9781413310603
Forms: 38 forms
Buy & download now @
Nolo
(publisher)
Press Reviews
| "Exceptionally clear."
The New York Times
|
| "How to File for Chapter 7 Bankruptcy advises on everything from how to file court papers to how to respond to threats from creditors.... A do-it-yourself bankruptcy book for people who can’t afford expensive lawyers."
Newsweek
|
| "An in-depth guide to filing under Chapter 7, including state-by-state and federal exemptions as well as forms for do-it-yourself filers."
Kiplinger’s Personal Finance Magazine
|
"Can help you decide if bankruptcy is the right option for you."
Detroit News
|
| "A valuable, easy-to-understand workbook."
Los Angeles Times
|
| "Includes clear instructions on when and how to fill out all the necessary forms, which assets you may legally keep, even advice on whether your case is complicated enough to make it worth your while to hire a lawyer."
Forbes
|
| "The best [bankruptcy books] I know are published by Nolo."
Harry S. Gross, host of
“Speaking of Your Money”
|
| "Covers all the recent changes to the bankruptcy law, and shows you how to get through the entire process with the least damage."
Accounting Today |
Customer Review
| "I bit the bullet, and purchased Nolo's How to File Chapter 7 Bankruptcy. I represented myself in court and I was granted a discharge of all debts five months later."
Danielle A.,
Richmond, VA |
Buy & Download now: Nolo
(publisher)
Chapter 13 Bankruptcy:
Keep Your Property & Repay Your Debts Over Time
(9th ed, 2008)

Are you behind on your mortgage, taxes or other bills? Are creditors threatening foreclosure or repossession? Consider Chapter 13 bankruptcy, which can provide you an affordable repayment plan -- and let you keep your house, car and other property
In Paperback and eBook (Adobe Reader)
Pub. Date: May 2008
Edition: 9th
Pages: 496 pp
ISBN: 9781413308556
Forms: 29 forms
List Price: 39.99
Buy now: Nolo
(publisher)
Press Reviews
| "In Nolo’s usual thorough fashion, here is a guide to an alternative to the typical Chapter 7 Bankruptcy."
Orange County Register
|
| "An excellent book that can guide you through the [Chapter 13] process."
Forbes Magazine
|
| "Chapter 13 Bankruptcy will save you a fortune in attorney fees and confusion."
The Midwest Book Review |
| "This is the best book going if you choose to file alone or if you want background on the Chapter 13 process."
Attorney Gary Klein,
co-author of Consumer Bankruptcy Law and Practice |
| "An excellent resource..."
Consumers Digest
|
| "Contains many tear-out forms, federal and state exemptions charts, and the most recent legal documents and instructions on how to fill them out. "
Reference & Research Book News |
The
New Bankruptcy: Will It Work For You? (New Bankruptcy)
by
Attorney Stephen
Elias. This book discusses, in plain-English
the practical implications of the bankruptcy law changes that
took effect in October 2005. The book explains how the new law is
not as bad as you may have thought. Most people
in financial straits can still gain much from filing. But there is
more paperwork and more stringent rules than under the old law.
Find out what's good about the new law, what's bad,
and how the new rules may affect you.
In Paperback and eBook (Adobe Reader)
Pub. Date: May 2009
Edition: 3nd
Pages: 400 pp
ISBN: 9781413310252
Forms: 22 forms
Buy this Book: Nolo
(publisher's site)
Press Reviews
| "Authoritative, comprehensive and packed with helpful advice and useful information, including state-specific details."
Eric Tyson, best-selling author of
Personal Finance for Dummies
and Mind Over Money |
| "With last year's change in the bankruptcy laws creating unprecedented confusion in the field, it's important to know whether it remains a viable option, and this book will offer both explanations and reassurances..."
Accounting Today |
|