Who Is Exempt From Taking the Bankruptcy Means Test?

You don't have to take the bankruptcy means test if you have mostly business debts, are a disabled veteran, or a military reservist.

Most debtors who want to file for Chapter 7 bankruptcy must complete and pass the bankruptcy means test. But there are a few exceptions that can exempt you from taking the means test. You may be excluded from the means test requirement if:

  • your obligations are primarily non-consumer (business) debts
  • you are a disabled veteran and incurred most of your debts while on active duty, or
  • you are a military reservist or member of the National Guard called to active duty prior to filing your case (this is typically a temporary exclusion).

For more information on how the means test works, see The Means Test in Chapter 7 Bankruptcy.

Non-Consumer (Business) Debt Exception

If the obligations you want to eliminate in your Chapter 7 bankruptcy are primarily (typically meaning more than 50%) non-consumer (business) debts, you are not required to complete the means test. Non-consumer debts are mostly obligations you incur in connection with a business or in an attempt to make a profit. But they can also include debts you did not intend to incur for personal purposes. Generally, if you intentionally take out a debt for personal, family, or household expenses or goods, it will be considered a consumer debt.

While there is no uniform rule on which obligations are considered non-consumer debts, courts typically look to the purpose of the debt when classifying it in bankruptcy. Many courts have held the following debts to be non-consumer in nature:

  • car loans for business vehicles
  • debts owed to business vendors and suppliers
  • personal guarantees and other debts related to your business
  • most tax obligations (even tax debts for unpaid personal income taxes unrelated to a business), and
  • necessary medical bills.

However, because courts differ in their opinions of what constitutes a non-consumer debt, consider talking to a knowledgeable bankruptcy attorney in your area to learn the rules in your jurisdiction.

Disabled Veteran Exception

Disabled veterans whose debts were primarily incurred while on active duty or performing a homeland defense activity are exempt from taking the means test to qualify for Chapter 7 bankruptcy.

To qualify as a disabled veteran for the purpose of this means test exception, you must:

  • have a disability rated of at least 30%, or
  • be discharged from active duty because of a disability that occurred in the line of duty.

Exception for Reservists and Members of the National Guard

If you are a military reservist or a National Guard member who was called to active duty after September 11, 2001, you may qualify for an exclusion from the means test requirement. If you were on active duty or performing a homeland defense activity for at least 90 days, you are exempt from completing the means test during that time and for 540 days thereafter.

However, this is typically a temporary exclusion. When the 540-day exclusion period comes to an end, you must complete the rest of the means test form within 14 days (unless the deadline for filing a motion to argue a means test presumption objection expires before the exclusion period ends).

See Bankruptcy Rules for Military Members for more information.

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