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Exploring the Chapter 7 Means Test

Jul 29, 2009 Bankruptcy Personal

When insurmountable debt trouble leads people to file for bankruptcy, they often find themselves stressing over the Chapter 7 means test. Specifically, the Chapter 7 means test will start with the seemingly daunting Official Form 22A – Determination of Presumption.

While this eight-page document is meant to ensure that only the most “qualified” of filers use bankruptcy as a way to eliminate their debt, the Chapter 7 means test is clearly not meant to frighten or intimidate filers.

When determining whether an individual qualifies for bankruptcy protection, the bankruptcy courts will first determine whether the person filing meets the median income level determined by the Census Bureau for their specific state. As far as the Chapter 7 means test is concerned, if income is anywhere below the median, then the determination of presumption will be made.

As for median income levels, they are readily available on most websites that discuss bankruptcy and its process. The median levels for single people range anywhere from a low of $32,348 in Mississippi to a high of $57,505 in Connecticut.

When submitting to the Chapter 7 Means Test, if the presumption does not arise based on the income levels, then additional questions will need to be answered. Many of them will require that the filer obtain “basic allowance amounts” from the IRS website for such things as housing expenses, living expenses, and so forth. When the actual amounts exceed the basic amounts, the application will be subjected to further scrutiny to eliminate the potential for fraud.

And ultimately the Chapter 7 Means Test exists for that very reason – to avoid fraudulent personal bankruptcy filings. But with that in mind, the Chapter 7 means test allows even the most financially mismanaged individual plenty of opportunity to meet the determination of presumption requirements. Fields such as charitable contributions and additional necessary expenses are provided, so that instances where the Census Bureau and/or IRS-maximums are far exceeded, with proper reason and evidence can still be included for the purposes of the Chapter 7 means test.

Remember, filing for bankruptcy is a stressful event. For that reason, the US Bankruptcy Courts have asked just 57 questions when subjecting filers to the Chapter 7 means test. These questions are all located on Official Form 22A and can be completed independently or with the assistance of a bankruptcy professional.

Tags: Bankruptcy Personal