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What is the bankruptcy means test?

If you’re researching bankruptcy, you might have run across the phrase “means test.” But what is it? And more specifically, what does it mean for you?

The means test could also be called the “ability-to-pay-your-debts” test because that is exactly what it is. When you file for bankruptcy, part of the process involves undergoing the means test to determine if you can pay your debts.

If the means test determines that you cannot pay your debts, you will qualify for Chapter 7 bankruptcy. If you can pay your debts over the course of a three-to-five-year timeline, then you will qualify for Chapter 13 bankruptcy.

The median income in Washington is the starting point

The means test begins with comparing your income and size of household to the median income for the same size household in Washington. The median annual income in Washington is as follows:

  • For 1 member households: $52,996.00
  • For 2 member households: $63,409.00
  • For 3 member households: $72,286.00
  • For 4 member households: $84,970.00
  • For 5 member households: $93,070.00
  • For 6 member households: $101,170.00
  • For 7 member households: $109,270.00
  • For 8 member households: $117,370.00
  • For 9 member households: $125,470.00
  • For 10 member households: $133,570.00

If your annual income is less than the median income, you will either qualify for Chapter 7 bankruptcy or in some cases, you may qualify for a Chapter 13 bankruptcy plan that lasts just three years. If your annual income exceeds the median income, you will likely need to file Chapter 13 bankruptcy and enter into a five-year payment plan. Even if you make “too much” money, however, you may be able to qualify for Chapter 7 bankruptcy – an attorney can assist with this.

The median income determination is just one part of the process. You will also need to provide information about your household expenses.

Would your income pass the means test and allow you to file Chapter 7 bankruptcy? Would you have the ability to pay your debts if they were reorganized into a Chapter 13 plan?