Here we go with the Means Test again! This term is an important part of understanding how the Means Test applies to your income and expense situation. “Hypothetical Living Expenses” are a combination of national and local expense standards that are published by the IRS. These standardized expenses are updated annually by the IRS. Because these expenses are hypothetical, they might accurately reflect your circumstances or they might be well below or above your actual expenses.
Nevertheless, these hypothetical numbers must be used for some (but not all) of your expenses in applying the Means Test against your gross income. Your net remaining income after applying this “Test” will determine whether you have too much net income to qualify for Chapter 7. The unfair and arbitrary nature of this test (arising from “hypotheticals”) is part of why Bankruptcy lawyers think this Test is inappropriate.
The actual standards that apply to your case can be found on a website maintained by the Department of Justice and the United States Trustee program. Or you can ask us for a free consultation and we’ll do a free analysis of your situation under the Means Test, applying the Hypothetical Living Expenses where appropriate, and we’ll show you what it means for you.