Am I Eligible for the Bankruptcy Means Test?

Most Americans doubt when bankruptcy is the right option for them, and a strong majority of those same Americans aren’t sure if they qualify for bankruptcy. Luckily, there is a way to determine eligibility for chapter 7 participants: the bankruptcy means test.

Since 2005, most individuals have to complete the means test, which is an evaluation that takes into account your income, expenses and family size to determine if you are eligible for chapter 7 bankruptcy.

What does the bankruptcy means test look like?

Essentially, the test is broken down into two parts. The first step requires you to check the household income and evaluate if it’s below Kentucky’s or Ohio’s median income. It usually contains the last six months of your finances, but you just adjust based on recent changes to your finances, like losing your job or other situations.

After that, the test will ask for six months of records for your expenses. You have to be incredibly detailed about all your shopping and recent purchases. The more detailed you are, the better the results will be.

What do the results mean for me?

If you are eligible, you can file under Chapter 7 bankruptcy, which is excellent for individuals who want to retain their homes or cars. They can easily restructure their debts and pay them off slowly through their typical income.

If you do not pass the means test, you may file under Chapter 13, which allows you to get caught up on current debts and hold onto assets. It is similar to Chapter 7 where you can restructure your debts and find a new way to pay off current bills.

You can also retest after six months, but it may have the same results. It’s up to you to determine the best process for you and your financial status.