Lesson 22 of 25 · 7 min
The 2005 bankruptcy-law change, as a clock change
A means test is a capacity comparison written into a statute, applied to income rather than collateral.
The Bankruptcy Abuse Prevention and Consumer Protection Act, 2005, is a widely reported public episode. A means test and longer waiting periods between filings changed who could use which chapter and how often. The lesson is that eligibility is a test, like a maintenance threshold. Nothing here characterises anyone's intent in writing the statute, and nothing here characterises anyone's intent in filing. 2005 is the year the test was written into the clock.
Track 9 lesson 1 is a comparison: a balance against a threshold. A means test is that comparison pointed at income. Current monthly income is set beside a median figure. A household on one side of the comparison faces a different chapter path than a household on the other side. Waiting periods between filings are a second clock: time that must elapse before some chapters can be used again. Both are eligibility mechanics. They are not a ranking of households.
An invented illustration, not a quoted median and not anyone's case: a household with current monthly income of $6,200 against an invented median of $5,800 sits on one side of the test. A household at $4,100 sits on the other. The $400 above the invented median, and the $1,700 below it, are distances from a line. The line is what 2005 added to the chapter clocks of lessons 16 and 17. Rules vary by jurisdiction and by the details of the test, and a reader's own situation belongs with a qualified professional.
2005 wrote a capacity comparison on income into the chapter clocks. Eligibility is a test. Nothing here is a recommendation to file, or a characterization of anyone's intent.
Key terms
- Means test
- A comparison of current monthly income with a median figure. Track 9 lesson 1, applied to income. Details vary.
- Waiting period
- Time that must elapse between some filings before a chapter can be used again. A second eligibility clock.
- BAPCPA, 2005
- The widely reported 2005 statute that wrote those tests into the chapter clocks. Named as the episode, not as a villain.
Worked example
Two invented incomes against one invented median
Illustrative figures scaled down so the arithmetic is followable; they are not the reported amounts. Invented median $5,800. Household A current monthly income $6,200. Household B $4,100. Not anyone's case. Rules vary by jurisdiction.
- Invented median
- $5,800
- Household A against the line
- +$400
- Household B against the line
- −$1,700
- What the test is doing
- A capacity comparison
- What 2005 also changed
- Waiting periods
The threshold in the example.
$6,200 − $5,800. One side of the test.
$5,800 − $4,100. The other side.
Track 9 lesson 1, on income.
A clock on how often some chapters can be used.
A sits $400 above the invented median. B sits $1,700 below it. The two distances are two results of one comparison, and the comparison is the 2005 change.
Check yourself
In an invented example the median is $5,800. Household A has current monthly income of $6,200 and household B has $4,100. What is each household's distance from the line, what kind of test is that, and who does a reader's own situation belong with?
A means test is a capacity comparison, Track 9 lesson 1, applied to income rather than to collateral, written into a statute in 2005. Open A call is a test failing, not a decision being made →
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Educational only. Nothing in this lesson is investment, legal or tax advice, or a recommendation to enter into any transaction. Figures are illustrative and computed from the inputs stated in the lesson.