Number: RS22058
Title: Bankruptcy Reform: The Means Test
Authors: Mark Jickling, Government and Finance Division 
Abstract: The Bankruptcy Abuse Prevention and Consumer Protection Act - P. L. 109-8 (S. 256) - was signed into law on April 20, 2005. A key provision of the new law subjects certain petitions for debt relief under Chapter 7 to a means test. Bankruptcy petitioners with relatively high incomes could be prevented from filing under Chapter 7 (where many unsecured debts are discharged, or wiped out, by the court) and instead given the choice of converting to Chapter 13 (where some debt must be repaid out of future income) or having their petitions dismissed and receiving no bankruptcy relief at all. The means test takes into account the petitioner's income, debt burden, and various allowable living expenses, which can vary significantly according to the debtor's place of residence and particular circumstances. If income minus allowable living expenses exceeds certain levels, a Chapter 7 petition is presumed to be abusive. This report sets out the details of the means test calculation.
Pages: 6
Date: May 9, 2005