What type of test is implemented under the Bankruptcy Abuse Prevention and Consumer Protection Act?

The means test is a critical component introduced by the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) to determine an individual's eligibility for Chapter 7 bankruptcy. This test assesses the debtor's income in relation to their expenses and establishes whether the individual has the means to repay a portion of their debts.

Under the means test, a debtor's average monthly income is compared to the median income for their household size in their state. If their income is below the median, they may qualify for Chapter 7 bankruptcy. If their income exceeds the median, the means test calculates disposable income to determine if they can afford to pay back some of their debts over a three to five-year period, thereby qualifying them for Chapter 13 bankruptcy instead.

The other choices do not serve the purpose defined by the BAPCPA. A risk assessment test is typically related to evaluating the likelihood of default, a credit score evaluation focuses on the borrower’s creditworthiness through their credit history, and a debt-to-income ratio analysis measures the percentage of an individual's gross income that goes toward servicing debt. None of these directly relate to the eligibility criteria for bankruptcy under the means test.