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What is the Chapter 7 "Means Test"?

As part of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 which became effective on October 17, 2005, a "means test" was instituted to determine whether or not a debtor is entitled to a Chapter 7 discharge, or whether such debtor must convert the case to one under another chapter of the Bankruptcy Code. The basic purpose of the means test is to compare monthly income and expenses to determine whether or not a Chapter 7 discharge would constitute an "abuse" of the provisions related to Chapter 7 in the Bankruptcy Code.

Official Form 122A-1, Chapter 7 Statement of Your Current Monthly Income, requests information regarding your gross monthly income for six months prior to the filing of your bankruptcy case.  However, some types of income (social security benefits, etc.) are not included for the means test calculation.  Generally, if your average gross monthly income is below the median income in Oregon for your family size, or if your debts are not primarily consumer debts, your case will not be presumed to be an abuse.  Even if your case is not a presumed abuse, your case could be dismissed if the Court finds that it was filed in bad faith, or if your financial situation demonstrates abuse.

If your income is above the median for your family size and your debts are primarily consumer debts, you will need to complete Official Form 122A-2, Chapter 7 Means Test Calculation.  Allowable expenses are primarily determined by IRS guidelines as opposed to actual spending.  Your case may be presumed to be an abuse if you have a specified amount of income left over after expenses are deducted.

You may still be entitled to a Chapter 7 discharge even if your case is presumed to be an abuse, particularly if the figures in the "means test" form do not accurately represent your current circumstances (e.g., you lost your job or have a lower paying job).  If a presumption of abuse exists, some party (usually the U.S. Trustee or a creditor) may file a motion seeking a dismissal of your case.  If a motion is filed, and you are unable to rebut the presumption of abuse, the Court generally will enter an order allowing you a certain amount of time to convert your case to Chapter 13, or the case will be dismissed.

If your debts are not primarily consumer debts or you are exempt from the means test due to qualifying military service, you will need to complete Official Form 122A-1Supp, Statement of Exemption from Presumption of Abuse Under §707(b)(2).

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