The Means Test Demystified

Since the change in bankruptcy laws in 2005, we frequently get calls from potential clients asking if it has become too difficult to file for bankruptcy in Massachusetts.  The answer is no, not at all! The new law adds many new requirements, including waiting eight years before filing again, significant verifications by your bankruptcy attorney, numerous statistical summaries, and lastly, a qualifying test based on income:  the Means Test.

Household Income Defined for Means Test

The income test is significant, and it can be complicated.  First, it compares your household income, which can be different from your individual income, to the state mean income.  The Massachusetts median income changes regularly, so your bankruptcy attorney needs to calculate your household income and compare it to the updated Massachusetts mean for a family of your size.  Or, you can complete and “pass” the test based on extraordinary expenses.

To skip the Means Test, your income must be below the mean income for Massachusetts.  It’s simple:  if you are a single person household, the current income ceiling is $53,496; for a two person household, it is $64,174; three people, it is $80,337; for four people it is $99,067; and, for each additional person there is an allowance of  $7,500.  Most folks are surprised the ceiling is so high.  You need to be careful, however, because if you are married or live in a household with another adult, his or her income is factored into the Means Test.  Also, the household income limits are adjusted, up and down, by the government on a periodic basis.

Income Higher than Mean and Still Allowed to File for Bankrutpcy?

However, if your income is higher than the mean, this should not stop you from considering filing for bankruptcy in Massachusetts.  What are the expenses the help you pass the Means Test if your income is too high?  The law allows using the following monthly expenses in the calculation:

  • taxes
  • involuntary deductions for employment
  • life insurance (but be careful if it’s a whole life policy)
  • court ordered payments (for such things as child support, alimony)
  • education expenses including for a child
  • childcare
  • healthcare
  • care for disabled or elderly family members
  • protection against family violence expenses
  • home energy costs
  • above national standard clothing costs
  • and even charitable expenses.

The Means Test then tallies your expenses to calculate your 60 month disposable income.  If your disposable income over a five year period is less than $6,575, then you “pass” the Means Test.

Hire an Experienced Bankruptcy Attorney

Since the Means Test became the law in 2005, the bankruptcy lawyers at Burns and Jain have helped many people qualify for bankruptcy.  Most people pass the test and do not have to itemize their expenses for the Means Test.  Navigating the Means Test, however, may require the help and counsel of an experienced bankruptcy lawyer.

We offer a free bankruptcy consultation.  We also offer a partial fee to complete the Means Test to be sure that you will qualify.  Call our office today at 617-227-7423 for your consultation.
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