Means Testing - Definition

The new means testing requirement for Chapter 7 bankruptcy
    

Means Testing in Chapter 7 Bankruptcy

The legal definition of "Means Testing" - Chapter 7 bankruptcy law provides that no one may be a debtor "if monthly income, reduced by expenses, multiplied by 60, is not less than the lesser of either (A)(1) the greater of 25 percent of general unsecured claims, or (A)(2)) $6,000, or (B) $10,000."

The new means testing provision is perhaps the most controversial aspect of recent Code amendments. In essence, means testing creates 3 different ways to disqualify individuals from filing Chapter 7. The basic application is that Congress determined, based on the ability to pay debts over 5 years, that all people should be forced into repayment plans unless total debts rise to catastrophic levels. The new means testing requirements are a radical departure from tradition practices over the last 75 years.

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