Chapter 7 bankruptcies offer many lower-income people the opportunity for debt forgiveness when the financial burden becomes unbearable. Qualifying for this form of bankruptcy depends on a process called the means test which involves answering a few specific questions about your income and spending.

Is your income higher or lower than the state’s median income?

The first step in the means test involves comparing your state’s median income to your income over the past six months. Eligibility is automatically granted to those who earn less than the median income in their state.

If your income is higher, what do you spend each month on allowable expenses?

Households with higher expenses for food, shelter, medical care and certain other “allowable expenses” may still qualify for Chapter 7 bankruptcy even if their income did not qualify under the first part of the means test. This part of the means tests addresses the cost of living, your specific needs in terms of health care and the number of dependents living in your household, among other details.

After a person documents their expenses, they can then deduct their allowable expenses from their income. If this deduction places them below the median income in their state, they can then file for Chapter 7 bankruptcy. If not, they do not pass the means test and may want to consider whether Chapter 13 bankruptcy better suits their needs.

Qualifying for Chapter 7 bankruptcy through the means test is just one step toward relieving the burden of debt, and it can be helpful to have an experienced attorney to guide you through the bankruptcy process.