Posted in Finance, Accounting and Economics Terms, Total Reads: 512
Definition: Means Test
Means test is used to determine whether a borrower is eligible for financial assistance. If the borrower fails to plan the Means test then the borrower has to pay the debt on his own and a repayment schedule is laid out. It can also be used to determine whether a family or individual is eligible for financial assistance of government programme. As the direct benefit scheme of the government are burgeoning the importance of means test are now more than ever.
In Canada the means test is used to financing student’s education and other welfare projects. Means teat are also used in while providing legal aid in Canada and United Kingdom. The famous Medicaid programme of United States is also determined by means test. The social security welfare programmes are also passed through the means test before allotting them to the beneficiary. In 2005 United States introduced means test in bankruptcy. Any debtor with an income greater than the median income of U.S and filing for bankruptcy has to pass the means test before providing any financial assistance. This is in accordance of chapter 7 of bankruptcy law. It the fails the means test, then as per the chapter 11 and 13 the repayment schedule is reorganized. Debtor whose income is below the median income of the state is not subjected to means test. Comparable programmes to Medicaid like the Medi fund of Singapore and medical cards of Ireland are also subjected to means test.