Means Test


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.


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.

  1. Debt

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

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

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

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

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

    A bankruptcy proceeding in which a company stops all operations ...
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  1. Do dividends affect working capital?

    Regardless of whether cash dividends are paid or accrued, a company's working capital is reduced. When cash dividends are ... Read Full Answer >>
  2. Do prepayments provide working capital?

    Prepayments, or prepaid expenses, are typically included in the current assets on a company's balance sheet, as they represent ... Read Full Answer >>
  3. Does working capital include salaries?

    A company accrues unpaid salaries on its balance sheet as part of accounts payable, which is a current liability account, ... Read Full Answer >>
  4. Will my credit score suffer from debt consolidation or refinancing?

    You have several options for reducing your debt burden. You can enroll in a professional debt management plan, or consider ... Read Full Answer >>
  5. Can I file for bankruptcy more than once?

    Filing bankruptcy is never a simple decision, but sometimes it is the best thing you can do in your current financial situation. ... Read Full Answer >>
  6. What is a profit and loss (P&L) statement and why do companies publish them?

    A profit and loss (P&L) statement, or balance sheet, is essentially a snapshot of a company's financial activity for ... Read Full Answer >>

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