Society used to harshly judge people who didn’t pay their bills. Robert Morris, a signer of the Declaration of Independence, spent three years in debtor’s prison in Philadelphia—and he was the financier of the American Revolution!
Today even celebrities like Lady Gaga, Mike Tyson and the billionaire President of the United States have declared bankruptcy, with no shame or jail time. There’s widespread acceptance of filing Chapter 7 personal bankruptcy to get out from under a mountain of debt and start fresh.
But before you wipe the slate clean, you are required by federal law to pass an income-analysis test called the bankruptcy means test that determines whether you’re eligible to file Chapter 7.
Your eligibility is based off information from one or two extensive federal forms, official form 122A-1 and possibly also official form 122A-2. On these forms you’ll report your income, debts, and expenses in great detail.
Congress required the means test beginning in 2005 when it toughened the bankruptcy laws with the passing of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). The idea was to stop flagrant abusers of the bankruptcy laws. Some high-living debtors were using Chapter 7 to bail out on lifestyles of the rich and shameless and leave society holding the bag.
Once you’ve proven to the court that you lack the “means”—another word for money or financial resources—to meet your obligations, you’ll pass the “means test” and may go ahead and file for Chapter 7 bankruptcy.
The means test makes filing for bankruptcy a little more difficult. But the good news is that most people pass the means test and get their Chapter 7 bankruptcy approved.
Be assured that you’ll have plenty of company in seeking debt relief through bankruptcy —469,464 Americans filed for non-business Chapter 7 bankruptcy in 2019, according to U.S. Bankruptcy Courts.