Is The Means Test Applicable?

In my previous blog, I discussed the Means Test. The Means Test determines whether an individual or couple is eligible to file a Chapter 7 Bankruptcy. However, there are limited circumstances where the Means Test may not be applicable. In these limited circumstances, a Chapter 7 Bankruptcy is available as long as you can show an inability to make a meaningful repayment to your unsecured creditors. In this blog, we’ll discuss some of the situations.

11 U.S.C. § 707 makes the Means Test inapplicable if the Debtor is a disabled veteran (as defined in 38 U.S.C. § 3741(1)) and the debt was incurred while on active duty (as defined in 10 U.S.C. § 101(d)(1)) or while performing a homeland defense activity (as defined in 32 U.S.C. § 901). Essentially, if you are receiving military disability benefits and have received a disability rating of at least 30%, or you were discharged or released from active duty due to a disability incurred or aggravated in the line of duty, then the Means Test may not be applicable. As long as you can show that you incurred these debts while on active duty or performing homeland defense, you can remove a difficult barrier to qualifying to file a Chapter 7 Bankruptcy.

The Means Test is also inapplicable if your debts are primarily “non-consumer” debts. Examples of non-consumer debts are business debt, taxes, medical bills and some student loan debt. If the majority of your debt is attributable to one of these types of debts you may be able to bypass the Means Test entirely and file a Chapter 7 Bankruptcy.

The Law Office of Andrew Magdy is a proud founding member of Allied Bankruptcy Law.