Means Test

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DEFINITION of 'Means Test'

A method for determining whether someone qualifies for a financial-assistance program. A common means test is the one used to determine eligibility for Chapter 7 bankruptcy. Means testing is also used in distributing Medicare benefits and has been suggested as a solution for the Social Security problem.

INVESTOPEDIA EXPLAINS 'Means Test'

Since debts do not have to be repaid under Chapter 7 bankruptcy, it is supposed to be limited to bankruptcy filers experiencing the greatest hardship. People who do not pass the Chapter 7 means test are limited to Chapter 13 bankruptcy, which establishes a repayment plan for debts.

RELATED TERMS
  1. Bankruptcy

    A legal proceeding involving a person or business that is unable ...
  2. Chapter 7

    A bankruptcy proceeding in which a company stops all operations ...
  3. Debt

    An amount of money borrowed by one party from another. Many corporations/individuals ...
  4. Medicare

    A U.S. federal health program that subsidizes people who meet ...
  5. Social Security

    A United States federal program of social insurance and benefits ...
  6. Chapter 13

    A U.S. bankruptcy proceeding in which the debtor undertakes a ...
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