Generally, whether you file a Chapter 7 or Chapter 13 Bankruptcy, you must submit a Means Test with the other forms and schedules.  There are exceptions for recently active members of the military and individuals with mostly business debt, but the use of these exceptions is not too common (to determine if you qualify for one of these exceptions, you should consult an experienced bankruptcy attorney).

The first part of the Means Test compares your average annual income against the median income of a family of the same size for the state in which you live.  To determine your average annual income, the bankruptcy code requires that you find the average of your last six completed months’ gross income.  You then multiply that number by twelve to get the yearly average.  This is the number that is compared to the median income of a family of the same size for your state.

You have to be cautious in determining what counts as income.  Often, people will forget money that they may have received from a second job, a bonus, or unemployment compensation.  Some of this is specifically income for the Means Test.  Some people contend that unemployment compensation falls within an exception to the definition of income on the Means Test.  It is important to understand what is considered income within the jurisdiction in which you reside.  A skilled and experienced bankruptcy attorney will be able to help you determine what applies in your case.

Additionally, a good bankruptcy attorney will help you qualify to file even if your income turns out higher than the median income.  The Means Test goes beyond this initial determination of income if you have a higher number than the median income (aka “above-median”).  This part of the Means Test is very in-depth and certainly requires the knowledge of an experience bankruptcy attorney to help you file your case.  The result could be that you qualify to file a Chapter 7, or you could use the Means Test to lower your monthly payment in a Chapter 13.  Hiring a skilled and knowledgeable bankruptcy attorney can save you a bunch of money in the long run.