What are median income and means tests?  These are two different tests used to figure out if you can file for bankruptcy.  Let’s review them one at a time:

The Median Income Test:  This test  is used when your debt is NOT business debt, and is mostly consumer debt.  To find your median income, you add your total monthly income for the past 6 months and divide it by 6.  Then, you compare it to the current median income figures for the same state and family size as yours, published on the U.S. Trustee website (insert link).  If your income is below this number, you can file for bankruptcy.  An attorney can advise you if filing for Chapter 7 or Chapter 13 is best for you.  If your income is more than the published median income for a family size similar to yours in your state, then you must do the Means Test.

The Means Test:  This test is used when your average monthly income is more than the median income for your state published on the U.S. Trustee website.   A lawyer can help you calculate this test.  The Means Test determines if you have money leftover at the end of the month, which affects whether or not you can file for bankruptcy.  With this test you calculate how much money you are bringing in, then subtract your expenses. The problem with this test is that you must use the published IRS numbers for your expenses, like food and transportation.  Sometimes those numbers aren’t the same as what you are actually spending.  Also, you can’t include student loans or retirement account loans when calculating a means test.The means test can show that you have money left over at the end of the month to pay your bills when in reality you don’t.

Speaking with an experienced bankruptcy lawyer can help you figure out where you stand on both types of tests, and help you figure out if you qualify for bankruptcy and if that is the best option for you.