The Means Test

The Means Test

The means test was touted as a way to assure that consumers (the test only applies to consumer debt cases) who have the means to repay a significant portion of their debt are required to do so.

The means test has two stages.  The first stage compares the income of the household to the median income for households of the same size for the state where the debtors reside.  If the income is lower than the median income the debtors may file a Chapter 7 Bankruptcy and obtain a discharge of their debts. For Wyoming Debtors filing after November 1, 2014 the median income levels are as follows:  Household of 1 – $49,721; 2 – $64,086; 3 – $75,456; 4 – $80,477.  For larger households add $8,100 for each member over 4.

If the income is higher than the median income, then a second calculation is done to determine the  “disposable income” which could be used to pay the unsecured creditors.  The “disposable income” is the gross income less allowable deductions.   The deductions are set by the IRS, and may very well be less than the actual usual expenses of the family.

If over a five year period of time the “disposable income” exceeds $10,000 or could pay at least 25% of the unsecured debt, then the debtors can not obtain a discharge in a Chapter 7 and must file a Chapter 13 with a 5 year repayment plan to obtain debt relief in a bankruptcy.  Otherwise the debtors may file a Chapter 7.

The Nolo site has a decent on line means test.   Click here to take the means test.

This page was last updated: November 7, 2014