Understanding the Means Test

by Amy Jackson

When considering the chapter of bankruptcy that will most effectively offer relief from your debts one of the deciding factors is the means test. This income based test is calculated to determine if your income is above or below the average for your household size.   The United States Census Bureau collects data regarding the amount of annual income each household earns based on size and area.  If your income falls below this average, then a simpler means test document is required for your bankruptcy petition.  If your income is higher than this average your case will be considered above median and will require a complex calculation of all income and expenses, a much lengthier process.  To determine if your income places your household in the above median category you will need determine a few factors before calculation begins.  First, what is your household size?  Husband, Wife, and 2 children make for a household of 4, however, often a household is made of extended family members, children of joint-custody, and domestic partnerships. Your attorney will be able to determine how these will affect your bankruptcy.  Second, gross income (before any deductions) from all sources will need to be calculated for the 6 months prior to the month of filing.  This income will include all sources including wages, child support, self-employment, etc. There are few exceptions to this.  Disclosing all sources of income will be extremely important for an accurate calculation of your means test.  Be cautious of online calculators.  The math may be correct but how the math is applied can make a big difference in a successful bankruptcy.

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