The bankruptcy means test is the mathematical formula that was inserted into the bankruptcy law in 2005 to determine how much of their debts individuals filing bankruptcy should pay back from their income ,when they file bankruptcy. If the available income shown under the means test is low enough the debtors can file a Chapter 7 bankruptcy, which often means they do not have to pay back their unsecured debts. If the means test shows a higher income the individuals will have to file a Chapter 13 bankruptcy, which requires them to make monthly payments for five years based on the amount the means test says is available.
The means test is computed by taking a debtor’s average monthly income and subtracting out what the bankruptcy law allows as expenses. For most expenses such as food, clothing and utilities the law allows a standard allowance based on the household size. For certain expenses such as taxes, child support, and medical the debtors may use their actual expense.
One problem that the 2005 legislation did not specifically address is what happens, when a husband and wife who are separated file a joint bankruptcy. The formula contains no provision for extra expenses such as duplicate rent or utilities that arise in this situation. And of course realistically, if the law says you can afford to make payments based on the expenses of a single household and you actually have to pay for two households, the plan is not going to work.
The means test however does allow extra deductions for special circumstance, and some separated joint filers have claimed the expenses of a second household as a special circumstance on the means test. This position has had some success in the courts.
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