Texas residents who wish to escape overwhelming debt by filing a Chapter 7 personal bankruptcy must pass what is known as a means test. This step was added to the process in 2005 when Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act to deter individuals who were able to repay at least some of their debts from filing Chapter 7 petitions.
The test is designed to find out whether or not bankruptcy filers have any money left after paying their basic living expenses each month, and people who fail it can continue to live with unmanageable financial situations, pursue a Chapter 13 bankruptcy instead or continue with their Chapter 7 petitions. Those who chose to move their Chapter 7 personal bankruptcy cases forward despite failing the means test face an additional hurdle as the bankruptcy court will presume that they are attempting to abuse the process.
Individuals generally fail the means test for one of two reasons. The most common reason is that they earn more than the average income in their state. Average incomes are adjusted for family size when means tests are evaluated. The second reason Chapter 7 filers may fail a means test is because some of their monthly expenses are considered unnecessary or frivolous. Certain expenses, such as shelter, food and utilities are established by national, state and local standards.
Attorneys with debt relief experience may help individuals who are struggling with debt to prepare for the Chapter 7 personal bankruptcy means test. Many people fail the test because they overestimate their incomes or forget to include certain allowable expenses on their paperwork. Attorneys could review this paperwork to ensure that the income listed is correct and all possible expenses will be taken into consideration. Expenses that are commonly omitted on means test documents include tuition expenses, the costs of caring for ill or elderly relatives and unusually high home heating or cooling bills.