Means Test (Bankruptcy) Law and Legal Definition

Means test refers to a test applied under Section 707(b) (2) of the Bankruptcy Code (11 USCS § 707(b)(2)) to determine whether an individual debtor's chapter 7 filing can be presumed to be an abuse of the Bankruptcy Code requiring dismissal or conversion of the case. The means test permits dismissal of the case if the debtor's income exceeds the state median income (regardless of the amount of debt) or on general grounds, including bad faith on the part of the debtor. It is also used to determine whether a debtor is eligible for Chapter 7 (liquidation) or must file under Chapter 13 (wage-earner repayment plan). The debtor may rebut a presumption of abuse only by a showing of special circumstances that justify additional expenses or adjustments of current monthly income. The means test was added to the Bankruptcy laws by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.