If you have researched filing Chapter 7 bankruptcy before, you are probably familiar with the dreaded Means Test. The Means Tests has dashed the hopes of many a would-be bankruptcy filer. This test was first included in the Bankruptcy Code in 2005 when the Code was revised. This revision made the requirements for Chapter 7 bankruptcy more difficult to meet and as a result many people that were eligible for relief under Chapter 7 before 2005 were no longer eligible after the revisions.
The Means Test is a form that every Chapter 7 debtor must fill out and file with their bankruptcy petition. The Means Test determines whether your financial situation is so dire that you shouldn’t have to pay back any of your creditors. The test uses your average monthly income from the last six months to determine if you have below or above average income. It then reduces this average using standard IRS deductions to determine if you have disposable income at the end of the month. If you have enough disposable income then you cannot file bankruptcy under Chapter 7.
However, the drafters of the Bankruptcy Code are fond of our country’s disabled veterans. Veterans, who became disabled as a result of serving our country in an active duty capacity or in a homeland defense activity, are automatically eligible for relief under Chapter 7 even when their income would usually make them ineligible under the Means Test. Disabled veterans considering filing Chapter 7 bankruptcy should consult with a local attorney. The Means Test is not the only eligibility requirement in the Bankruptcy Code.