The bankruptcy means test is a process debtors undergo to find out if a chapter 7 bankruptcy is the right path. The test identifies whether or not a debtor is eligible for chapter 7. Unless you are a disabled veteran, you will have to go through the means test process before you can file a chapter 7 bankruptcy. Veterans who are more than 30 percent disabled may bypass the means test.

The test consists of two parts and is in place to curtail any abuse of the bankruptcy system. The first step involves a comparison of your average income going back for six months with the state of Wisconsin’s median family income. If your income is less than the Wisconsin median income, then you are probably eligible to file for chapter 7 bankruptcy.

The income comparison looks at sources such as employment wages, dividends or royalties, unemployment payments, spousal support and many others. It is a good idea to speak with a bankruptcy attorney who can tell you all the income sources the test will use. If it is determined that your income is less than the state median, you will not have to continue with the second step of the means test.

If your income is more than the state median, you can either change to a chapter 13 bankruptcy or continue with the means test. The second step of the test involves establishing any special circumstances that may make you eligible for chapter 7 even if your income exceeds the median. In order to prepare and present your case successfully, you will benefit from a bankruptcy lawyer’s guidance during the second stage of the test.

Source: FindLaw, “The Bankruptcy Means Test,” accessed July 31, 2017