Bankruptcy Means Test

In 2005, Congress enacted the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCA). In an attempt to prevent people from abusing bankruptcy the Act requires debtors to pass a Means Test before they are allowed to file bankruptcy. The Means Test is simply a method used to calculate a persons yearly income, and then compare that income to the median income of the persons home state. Once the debtor passes the test he/she can file bankruptcy.

Operating the Means Test:

The bankruptcy Means Test compiles your family’s income, from all sources, considers the size of your family, and then compares your family’s income to your state’s median income to determine if the Bankruptcy Court will hear your case. This is how it works. To determine your family’s yearly income you add together every source of income received in the last six months then multiply the sum by two. Next you look up the Oklahoma median income for a family with the same number of members as your family. The more family members you have the higher the median family income. Finally compare your family’s yearly income with the median family yearly income. If your income is lower than the median family income you qualify to file bankruptcy.

Pass or Fail the Means Test

As mentioned above, if your income is lower than the median family income you qualify to file bankruptcy. That is you passed the Means Test. However, if your income is higher and you fail the test, a presumption arises that you are attempting to abuse the bankruptcy process. If you pass the test there is no presumption of abuse.

Military Exemptions to the Means Test

There are two narrow exemptions that allow a debtor to file bankruptcy without passing the means test. First, is the disable veteran exemption. This exemption applies to you if (1) you are entitled to 30% veteran’s disability or you have been discharged because of an active duty disability;or (2) your indebtedness occurred primarily during a period of active duty or performing a homeland defense activity. Secondly is the active duty or homeland defense exemption. This exemption applies if you file your Chapter 7 bankruptcy case during your term of duty, or within 540 days after it ends. Other than these exemptions you will have to pass the means test before the Bankruptcy Court will hear your case.

Bankruptcy Lawyer Consultation

If you’re facing crushing financial problems filing bankruptcy and getting a fresh start is an option you should consider. If you qualify the process isn’t that difficult. Filing a chapter 7 forgives most of your unsecured debt. You don’t make payments on the debt its forgiven forever. Call today and get the bankruptcy information that you need.