The means test came into existence with the changes to the United States Bankruptcy Code that went into effect in October of 2005. It’s purpose is to prohibit individuals who make a substantial amount of money from filing Chapter 7 bankruptcy. The means test states that a debtor qualifies to do Chapter 7 bankruptcy if the debtor’s gross income for the six months immediately prior to the filing of a bankruptcy is less than the state median income for a debtor’s family size. As of March 15, 2010 the state median income in New Jersey is as follows:
One Person Household
$59,812.00
Two Person Household
$71,744.00
Three Person Household
$85,764.00
Four Person Household
$102,984.00
Five Person Household
$110,394.00
Six Person Household
$117,894.00
Seven Person Household
$125,394.00
Eight Person Household
$132,894.00
In the event you operate a business, or are otherwise a 1099 independent contractor, you may be able to deduct expenses from your gross in order to establish your income for the means test calculation.
In the event your income is above the state median income, you may still be able to qualify to do bankruptcy by further qualification under the means test. This section of the means test takes into account your gross income, and then allows you to deduct expenses based upon standard IRS allowances.
If you don’t qualify for a Chapter 7, then you would have to file Chapter 13.