Trying to figure out if you can meet all the requirements for a bankruptcy discharge can be a challenge. Especially if you don’t know where to start. That is why the Bankruptcy Means Test form was created to help you navigate through to see if you qualify to file for bankruptcy discharge. Everyone hopes to “pass” the test, so let’s figure out how we can do that with your income.

What is the Bankruptcy Means Test?

The Bankruptcy Means Test is a simple bankruptcy form that you must complete and file with the bankruptcy court. In the form, you will be able to calculate your average monthly income. Then, the figure is multiplied by 12, so it can calculate your average annual income. Also to note, the Bankruptcy Means Test will be applied to your whole household. This means, that even if your spouse will not be filing for bankruptcy, you have to include his/her income when calculating the Bankruptcy Means Test.

The cause why you must use the household’s income for the Bankruptcy Means Test is because the test will compare your average household income to the average income for a household of the same size in your state. So, the figures that were used to calculate average income for your state comes from the Census Bureau data. This means that the test will determine if your household’s average annual income is higher or lower than households in the state with the same amount of people.

You can calculate your current monthly income by adding your income from all sources for the six months before filing bankruptcy and dividing by six. Then from there, you will need to use gross income before deductions. Only except in the case of rental income and business income. You do not have to include payments received under the Social Security Act. Such as SSDI, SSI, and Social Security retirement as monthly income on the Bankruptcy Means Test. Although, you need to include this income when you complete other bankruptcy forms.

Income Included in Bankruptcy Means Test

There are many types of income that are included in the Bankruptcy Means Test. The language states that it is the average monthly income coming from all sources that the debtor receives. Alternatively in a joint case, the debtor and the debtor’s spouse receive. This is without any regard to whether such income is taxable income, derived during the 6-month period that is ending. From there, the last day of the month will be immediately preceded by the date of the commencement of the case if the debtors file the schedule of current income required by section 512. As well as you can do the date on which current income is determined by the court for purposes of this title if the debtor will not file the schedule of current income by section 521.

You can also be included in any amount paid by any entity besides the debtor. Otherwise, it will be in a joint case the debtor and the debtor’s spouse on a basis for the household expenses of the debtor/debtor’s dependents.

Income Not Included in Bankruptcy Means Test

Now, there is income that has been excluded.

Social Security Benefits

For instance, having benefits received under the Social Security Act (42 U.S.C. 301 et seq.).  If you are not sure what your Social Security benefit may be.

Payments of Victims of War Crimes

Also not included are payments to victims of war crimes/crimes against humanity on account of their status as victims of such crimes.  Another one is having payments to victims of international terrorism/domestic terrorism. These terms are defined in section 2331 of title 18, on account of their status as victims of such terrorism.

Compensation paid under title 10, 37, or 38 in connection with a disability of uniformed services

 Any monthly compensation, pension, pay, annuity, or allowance paid under titles 10, 37, or 38 in connection with a disability, combat-related injury/disability, or death of a member of the uniformed services.Except those retired pay excluded under this subclause shall include retired pay paid under chapter 61 of title 10 only to the extent that such retired pay exceeds the amount of retired pay to which the debtor would otherwise be entitled if retired under any provision of title 10 other than chapter 61 of that title.

Payments Related to National Emergency

As well as payments made under Federal law relating to the national emergency declared by the President under the National Emergencies Act (50 U.S.C. 1601 et seq.). With respect due to the coronavirus disease 2019 (COVID–19).

Is Bankruptcy Based On Household Income?

Yes,  it is all based on your household income and whether you will qualify or not from the Bankruptcy Means Test. Don’t forget, that your current monthly income is multiplied by 12 to calculate your average annual income. So, your average annual income is compared to the average income for households of your size in your state. If you are below the state median income, you “pass” the Means Test and should qualify for a bankruptcy discharge. However, if your annual income is above the state median income, you might have to do a second test to identify deductible expenses that may still allow you to qualify.

You can check out the Bankruptcy Means Test forms for your current monthly income. These forms are the Official Bankruptcy Forms that are approved by the Judicial Conference. This form should help you figure out based on your household income if you will “pass” and qualify.  However, you will also need to provide other information to complete the forms. For example, you need the current Census Bureau data, IRS Data, and Administrative Expenses Multipliers to complete the calculations required by the Bankruptcy Means Test. Don’t forget that the UST will periodically update the information. You have to ensure that you are using the most latest data available when you calculate the Bankruptcy Means Test. If you were to use any outdated information, it could result in an error in the Means Test calculations on your end.