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The importance of the means test when filing for Chapter 7

For those in Arizona who are experiencing financial struggles, Chapter 7 bankruptcy is an option that many consider. While Chapter 7 - also referred to as a liquidation - might sound like a viable choice, there are certain factors that must be in place for it to be available to the prospective filer. There is a "means test" that must be met for it to be a choice. Before moving forward with Chapter 7, it's important to know the criteria that must be in place via the means test.

In October of 2005, the means test was instituted to see if a debtor can receive a discharge under Chapter 7. This is part of the Bankruptcy Abuse Prevention and Consumer Protection Act from that year. If the person filing in not eligible, the case might need to be converted to another form in lieu of Chapter 7. The means test is intended to look at the debtor's income and expenses on a monthly basis to see if allowing Chapter 7 would fall under abuse based on what Chapter 7 bankruptcy is supposed to be for.

A statement of monthly income will be requested to see what the debtor's gross income was for the six months prior to filing for Chapter 7. Some forms of income will not be calculated in the means test. These include Social Security benefits. In general, abuse will not be presumed in the event that the debtor's average gross income is lower than Arizona's median amount. Abuse will also not be presumed if the debts are not mostly consumer-related. The case can still be subject to dismissal if there is a belief that the filing is in bad faith or financial circumstances are indicative of abuse.

It is still possible to have debts discharged under Chapter 7 even if there is a presumption of abuse. The means test numbers might not be a clear and accurate representation of the financial situation. For a person who lost his or her job or has a job that pays less, there is still a chance to receive a liquidation under Chapter 7. Chapter 7 bankruptcy is not a simple process and those who are having trouble determining whether they're eligible or need answers to any questions regarding its applicability should discuss the matter with a legal professional experienced in Chapter 7 before moving forward or choosing another option.

Source:, "What is the Chapter 7 'Means Test'?", accessed on March 12, 2015