Means Test: pass the test to file Chapter 7
The means test was added to the Bankruptcy Code to create objective standards for determining which individuals are "worthy" of relief in Chapter 7. It applies only to individuals and only those individuals whose debt is primarily consumer debt.
The means test is calculated comparing the debtor's average income
for the past six months (current monthly income),
annualized, to the median income for households of the same size in
the debtor's state of residence. If the debtor's income is less than
or equal to the state median income, the debtor "passes" the means test
and may file Chapter 7. 
What's income?
If the debtor's income exceeds state median income, a further analysis is performed, looking at the debtor's calculated ability to fund a Chapter 13 plan. The debtor's disposable income is calculated applying a mix of actual and standardized expenses to the debtor's previous average income! Here's the official form on which this is calculated.
If the debtor can pay $10,950 in five years or as little as $182.50/month to creditors, a presumption arises that a Chapter 7 filing is "abusive". Here's a diagram of the analysis.
The presumption of abuse may be rebutted by the debtor by presenting facts and circumstances not provided for in the prescribed test. One obvious "special circumstance" might be that the debtor is now unemployed and doesn't really have the ability to pay that the artificial test suggests.
Means test in action
There are many unanswered questions about the application of the means test to various family configurations and income scenarios. Only court interpretation of the murky areas of the amendments will begin to map the actual effect of the means test and other aspects of the 2005 amendments.
Developments on the car ownership allowance in the means test
Legal issues and bankruptcy questions are frequently complex and individual. The information contained here is intended to be educational only: it is not legal advice nor does it create an attorney client relationship between the viewer and the firm. You should consult with a bankruptcy attorney licensed to practice in your state for advice about your particular situation. See Law on the Internet
11/9/08