What is a means test?

A means test is a tool used in Chapter 7 bankruptcy law in California to determine whether an individual is eligible to file for bankruptcy. It is a financial assessment of the individual’s income and expenses to determine if the individual qualifies for Chapter 7 bankruptcy protection. The means test looks at the individual’s average monthly income for the six months prior to filing for bankruptcy. The means test also takes into account certain expenses such as taxes and mortgage payments to arrive at a disposable income amount. If the individual’s disposable income is too high when compared to the median income level for their state, they are not qualified to file for Chapter 7 bankruptcy. This is to prevent individuals who have the ability to pay their creditors from using Chapter 7 bankruptcy to evade their financial obligations.

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What is a means test?

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