The means test was put into the amended bankruptcy code in 2005, because of a perception in Congress that many debtors were abusing the bankruptcy process. The credit card companies and car lenders heavily lobbied for a number of years to get banruptcy reform passed and were sucessful in 2005. The exact provision in the bankruptcy code is 11 U.S.C. 707 (b) (2) (a) (i). What the means test is a six month average of the Debtor's income from all sources and their spouses if applicable divided by six and then multiplied by 12 to come up with a hypothetical income over that year for the size of their household to determine whether there is a presumption of abuse for filing a Chapter 7. If the Debtor is over the median income according to Census bureau data for their state income threshold it is presumed to be an abuse, and the Debtor must complete the second part of the means test to determine if they still qualify for a Chapter 7 or what the percentage will be paid back in a Chapter 13. The U.S. Trustee website here, shows the median income levels for each State and the census bureau data that determines standard living expenses if one must complete the second part of the means test. The website above also contains the standard amounts for living expenses, such as food, clothing, medical expenses, operation of a vehicle and other deductions that count toward eligibility for a Chapter 7.

It is very important to note that some expenses count and some don't when determining whether a person is eligible for a Chapter 7 bankruptcy. Experience matters when choosing a Chicago bankruptcy attorney. Some of the expenses that count are secured payments for a mortgage, a vehicle loan, and other secured debts. The expenses that don't count toward the means test are student loan payments, savings toward retirement, or 401 K loans, and others. If after deducting these standard expenses, and eligible expenses the debtor has little or no disposable income then the debtor may still qualify for a Chapter 7 bankruptcy. However, if the Debtor has income greater than 25% if their non-priority unsecured claims in the case, or $6000 whichever is greater or $10000 they have to do a Chapter 13 bankruptcy. The Chapter 13 trustee, and recent Supreme Court decisions give the judge and trustee either the mechanical approach or the old formula of the debtors income, minus expenses to determine what the percentage to creditors should be in a Chapter 13. When choosing a Chicago bankruptcy attorney experience counts. I have filed numerous cases under the new law and have been practicing primarily bankruptcy for over seven years. The bankruptcy reform act of 2005 does not stop me from advocating on my clients behalf. My office offers a free consultation to discuss your options when you are drowning in debt. I will determine your eligibility and go through your options at a free consultation. I want you to lose your debt and keep your dignity throughout the entire process. Please call my office for a free consultation today at 312-489-8182!

Marc