3 Means Test Mistakes That Could Derail Your Chapter 7 Bankruptcy Filing

Law Blog

The means test is an important part of the Chapter 7 bankruptcy filing. If your income does not meet the requirements for the test, you cannot file. To keep your petition moving through the bankruptcy court, you need to avoid some of the most commonly made mistakes with the means test.  

Incorrectly Claiming Deductions

In the means test, you are allowed to deduct some of your expenses from your income to determine if you are eligible to file for a Chapter 7. There are strict guidelines which dictate the deductions that are allowed, and failing to claim the right ones could put your bankruptcy filing in jeopardy. Determining which deductions are allowed can sometimes be challenging.  

Deductions that are essential to you and your family's welfare are usually allowed. This can include your mortgage, health insurance, daycare expenses, and utilities. Other deductions that do not tend to have a bearing on your welfare now are usually not allowed. For instance, your 401k contributions or loan repayments are not considered an allowable deduction. 

Failing to Include All Dependents

Your eligibility for Chapter 7 depends a great deal on the size of your household. You have to make less than the median income for a household that is similar to yours. The definition of what constitutes a household can vary by state, so it is important that you learn exactly who is considered a dependent.  

Some states only consider dependents people who are living under your roof who you are financially responsible for. In other states, anyone could be considered a member of your household if he or she is dependent on you regardless of where he or she lives. Your attorney can help determine your state's laws and whether or not the people you want to include in your filing are legally considered dependents. 

Failing to Provide Documentation and Explanations

Every single number you include on your bankruptcy petition needs to have documentation to prove they are legitimate. For instance, if you are claiming a deduction for child care, you need receipts from your child care provider or cancelled checks or money order receipts to prove that you made the payments. If not, the bankruptcy trustee could disallow a deduction you are claiming.  

You also need to be prepared to offer an explanation for everything included on your petition. Even with a receipt, the trustee might have further questions about numbers included. If you are unable to successfully answer those questions, your petition could be dismissed or delayed in the court. 


17 January 2017