When you are planning to apply for Chapter 7 bankruptcy, you have to complete a means test. The test helps to measure if you meet the financial requirements for filing for bankruptcy. If you fit one of the following three categories, you do not have to complete the test.
Means Test
The test measures your monthly expenses against your monthly income. The amount of each from the past six months is used to do the test. The more income you have remaining after your expenses are paid, the more unlikely it is that you will be eligible to file for Chapter 7. You might be forced to file for a Chapter 13 instead.
Disabled Veterans
If you incurred a majority of your debts during a period in which you were full-time active duty or while defending the country or its citizens and became disabled, you do not have to complete the means test.
To be considered a disabled veteran, you must show that you are receiving compensation at the rate of at least 30 percent or higher. If you were discharged from service, you have to prove it was an honorable discharge due to your injuries.
Business Owners
If most of your debts are the result of owning and operating a business, you might be exempt from taking the means test. You have to show that the debts occurred when you personally guaranteed repayment as the owner of the business. Depending on the area in which you live, you might be able to claim tax debts from your business as a business debt.
To meet the standard as a business owner, you have to show that 50 percent or more of your debts are from your business.
Military Reservists
If you are a military reservists or a member of the National Guard, you do not have to take the means test if you were active duty within the last 540 days. You have to prove that you served for at least a period of 90 days to be eligible.
After the 540-day period has ended, you must take the means test.
The means test is one of the most important aspects of Chapter 7 bankruptcy filings. If you meet certain requirements, such as having a high rate of business debts, you can bypass the need to take the means test. Talk to your bankruptcy attorney if you think you might meet the requirements to skip the test. (For more information on bankruptcy, contact an attorney at FactorLaw or another firm)
