What is a Means Test?
What is a Means Test?
A means test is an essential portion of the bankruptcy petition that must be filed with the rest of the schedules that comprise a bankruptcy petition. In a Chapter 7, the official name for the means test is Form 22A: Statement of Current Monthly Income/Means Test. In a Chapter 13 bankruptcy, the official name is Form 22C: Current Monthly Income/Disposable Income. The means test is what determines whether a person is eligible for file a Chapter 7 bankruptcy. In a Chapter 13, the means test determines how much a person will be back to their unsecured creditors, if any.
In order to complete the means test, the first step is entering all forms of income for the debtor for the six months prior to the month the bankruptcy is filed. Therefore, if a person is going to be filing a bankruptcy in May, the debtor’s income should be entered for the beginning of November through the end of April. Applicable income includes child support, employee wages, self-employment income, income from rental properties, food stamps, pension income, alimony, etc. The only income that does not apply in the means test is Social Security income.
If the person is under median based on their household size, they are eligible to file a Chapter 7. If they are over median, additional information will need to be entered, such as mortgage payments, car loans, taxes, mandatory wage deductions, mandatory 401(k) deductions, court-ordered alimony or child support payments, child care, healthcare expenses, health and term life insurance premiums, telecommunication expenses, etc. There is an automatic deduction based on household size for utilities, food, etc. Once those specific expenses have been factored, if the DMI (disposable monthly income) is negative, the debtor will still be eligible to file a Chapter 7 bankruptcy based on those expenses. If the DMI is positive, the debtor will be required to file a Chapter 13 bankruptcy. The DMI amount will determine what the debtor will be required to pay each month to their unsecured creditors for the next 60 months. The remainder will be discharged. When filing a Chapter 13 bankruptcy, debtors will also get a creditor for any 401(k) deductions, regardless of whether they are mandatory. If you would like more information about the means test, contact a St. Louis or St. Charles bankruptcy attorney.