To be eligible to use Chapter 7 bankruptcy, you must pass the means test: a calculation that looks at your income, and perhaps your expenses and debts, to determine whether you could afford to pay off at least a minimum amount of your debts. If so, you will not pass the means test -- and will not be allowed to use Chapter 7.
You will pass the means test if your income is less than the median income for a household of your size in your state. However, you must generally include your spouse's income in this total, even if your spouse doesn't file for bankruptcy with you. This article explains how to count your spouse's income and what amounts you don't have to include when figuring out whether you pass the means test.
Understanding the Means Test
The means test compares your "current" monthly income -- your average income from all sources over the six months before you file for bankruptcy -- to the median income in your state for a household of your size. If your income is less than the median, you can use Chapter 7. If not, you will have to do further calculations to figure out if you have enough disposable income, after subtracting allowed expenses, to repay at least some of your unsecured debts (credit card bills, medical debt, and so on). If your disposable income is more than a minimum amount set by law, you won't be eligible to use Chapter 7. If you decide to file for bankruptcy, you must use Chapter 13 and repay some of your debt over three to five years instead.
How Your Spouse's Income Affects the Outcome
When it comes to the means test, the lower your income, the better. If you are married, however, you must include your spouse's income in the total, even if he or she isn't filing for bankruptcy with you. There are a couple of exceptions to this general rule, however:
- If you are legally separated and living separately (for reasons other than to circumvent the bankruptcy rules), you do not have to include your spouse's income. In this situation, you must check a box on the means test form, which qualifies as your sworn declaration that you are legally separated and living apart.
- If you are married and living together, you must list your spouse's income on the form. However, you can subtract any amounts of your spouse's income that is not regularly paid towards your household expenses (or your dependents' expenses). For example, if your husband pays $650 to his ex for child support, you can subtract that amount from your income. You make these subtractions in the section called "Marital Adjustment" on the means test form.