The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), which was passed in 2005, included several major changes to the United States Bankruptcy Code. One of the most significant changes is a "means test" which is outlined in Section 707(b)(2) of the Bankruptcy Code and makes it more difficult for individuals to have their debts discharged through Chapter 7 Bankruptcy. Under the BAPCPA, if the debtor's income is above the median income for their state they must pass this "means test" in order to file Chapter 7 Bankruptcy. Debtors who fail the means test may not be allowed to file Chapter 7 Bankruptcy, but instead, may be allowed to file Chapter 13 Bankruptcy and repay a portion of their debt over a three to five year period under a Chapter 13 Bankruptcy repayment schedule.
Under 11 U.S.C. § 101(10A), a debtor's current monthly income is the average income received by the debtor for the 6 months prior to filing for personal bankruptcy. The means test takes the debtor's current monthly income and lowers it by certain deductions or "presumed expenses" outlined by the IRS (Internal Revenue Service). The goal of the means test is to determine if the debtor has enough extra income to repay their creditors. If the debtor has 1) at least $182.50 in current monthly income after the deductions listed in 11 U.S.C. § 707(b)(2)(A), (ii)-(iv) are deducted and this is equal to $10,950 over the next five years (regardless of the amount of debt) or 2) the filer has $109.59 in income (which is $6,575 over the next five years) and is able to pay their unsecured creditors more than 25% of the debt they owe them (over the next 5 years) the debtor may be forced to file Chapter 13 Bankruptcy (unless special circumstances exist).