chapter 7 bankruptcy

Chapter 7 “Means Test”

  • A Bankruptcy Court may dismiss a chapter 7 bankruptcy that involves primarily consumer debt if it is considered to be an “abuse”.   Under this provision, an individual’s chapter 7 case is presumed to be an “abuse” if he is unable to pass the “means test.”
  • The “means test” involves a computational test – (involving income and expenses) to determine whether a person’s case is presumed to be abusive.
  • Income used in the means test is based on the six month period prior to the month of the filing of the bankruptcy case.
  • Expenses used in the means test are based on IRS collection standards and actual expenses. The application of the “means test” is often quite complex.