Exceptions to the Bankruptcy Means Test

The means test was added to the Chapter 7 bankruptcy eligibility requirements in 2005 and is designed to keep high income filers from qualifying for this type of relief. If your income is lower than the state median income, you will qualify for a Chapter 7 without going further. However, if it is higher than the state average, you will have to first pass the means test before gaining eligibility to apply.
The test compares your income to certain allowable expense to see if you can repay a certain portion of unsecured debt. There are three situations that would allow for an exemption to the means test:

1) Your Debts are Primarily Non-Consumer Debts: In the case that more than 50 percent of your debt is non-consumer debt, you are excused from this requirement. This generally means that the majority of your debt is business debt, but some courts consider personal income tax debts to be non-consumer debts too.

2) Disabled Veterans: If you are a disabled veteran and your debts were incurred primarily when you were on active duty or engage in homeland defense activities, you are exempt from passing the means test. However, you must have a disability rating of at least 30 percent.

3) Military Reservists and the National Guard: Members of the military reserve or National Guard are exempt from the means test for the period they are on active duty and for 540 days thereafter, as long as they were on active duty or performing homeland defense activities for at least 90 days. Once the exclusion period ends, if the time has not passed for objections to the means test qualification, the means test will again become a requirement.