One of the more devious provisions of the 2005 Bankruptcy Code amendments is the means test. This test acts as a gatekeeper for those filing bankruptcy. Meet the means test and the promised land of Chapter 7 is available. Fail the means test and you are consigned to Chapter 13. Now, don't get me wrong; Chapter 13 has its place, especially if you're about to lose your house. But for millions of people who desperately need a fresh start, Chapter 7 is the goal.
The means test looks at the ability, or means, of an individual to pay back part or all of his debt. If your means allow you to repay, you are forced into Chapter 13. On its face, that isn't so bad because those who can pay, should pay, in the opinion of most people. But the way the means test works doesn't measure ability to pay. Under the means test, the debtor (person who is going to file) averages his income for the past six months and compares that to the state median income. If his average income is below the state median, he passes the means test and can file Chapter 7. If it's above, there are a couple of other tests, but the real key is the state median compared to the last six months' average.
But here's the problem. Suppose the debtor has been out of work (a not uncommon situation right now) for the last 60 days. Right now, he has no income, but for the four months before he lost his job, he had income; maybe a good income. If that four months of income averaged over six months exceeds the state median income, this person does not qualify for Chapter 7, even though he has absolutely no income right now with which to fund a Chapter 13 plan.
Just another of the anomalies forced on us by BAPCPA.
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