Why the Means Test Exists
Before 2005, individual consumers could generally choose to file Chapter 7 bankruptcy — a liquidation and discharge proceeding — or Chapter 13 — a repayment plan proceeding — based largely on their own assessment of which was more appropriate. Congress became concerned that some filers with sufficient income to repay at least a portion of their debts were choosing Chapter 7 to avoid any repayment obligation.
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) introduced the means test in response. The means test is a standardized income and expense calculation designed to assess whether a filer's disposable income — income remaining after deducting allowed expenses — is high enough that requiring them to repay creditors through a Chapter 13 plan would not be abusive. Filers who pass the means test can proceed with Chapter 7. Those who fail it face a presumption of abuse that can result in their case being converted to Chapter 13 or dismissed.
The bankruptcy means test is a two-part calculation established by 11 U.S.C. § 707(b)(2) that determines whether an individual's income and expenses indicate that a Chapter 7 filing would be presumed abusive. Part 1 compares the filer's average monthly income over the preceding six months to the median income for a household of the same size in their state. Part 2 — required only if income exceeds the state median — calculates monthly disposable income by deducting allowed expenses from income to determine whether enough remains to fund a Chapter 13 repayment plan.
Who Must Complete the Means Test
Not all bankruptcy filers are required to complete the means test. The following categories are exempt from means test requirements:
- Business debtors: Individuals whose debts are primarily business debts — not personal, family, or household debts — are exempt from the consumer means test. The determination of whether debts are primarily business or consumer depends on the nature and purpose of the debts, not their labels.
- Disabled veterans: Veterans with a disability rating of at least 30%, or who were discharged from service as a result of a disability incurred during active duty, and who incurred most of their debt during the period of active duty or homeland defense activity, are exempt from the means test.
- Certain National Guard and Reserve members: Members serving on active duty or homeland defense after September 11, 2001 may also qualify for exemption under specific statutory conditions.
For all other individual consumer filers, the means test must be completed. The forms are filed with the bankruptcy petition as part of the initial filing package.
Part 1: Comparing Income to the State Median
The first part of the means test compares the filer's calculated current monthly income (CMI) to the median income for a household of the same size in the filer's state. The state median income figures used in the means test are published by the U.S. Trustee Program and updated periodically based on U.S. Census Bureau data. Current median income tables are available at justice.gov/ust/means-testing.
If the filer's annualized CMI is at or below the state median for their household size, the presumption of abuse does not arise and the filer generally qualifies for Chapter 7 without completing Part 2. This is sometimes described as "passing" the means test on income alone.
If the filer's annualized CMI exceeds the state median, they must proceed to Part 2 — the more detailed disposable income calculation — to determine whether the presumption of abuse applies.
The median income threshold varies by both state and household size. A two-person household has a higher median income threshold than a one-person household in the same state. Adding dependents to the household calculation increases the applicable median, which can affect whether a filer passes Part 1 without completing Part 2. Household size for means test purposes is calculated according to specific rules that may differ from a simple count of who lives in the home, and the precise definition has been subject to varying court interpretations. The current median income tables by state and household size are at justice.gov/ust/means-testing.
How Current Monthly Income Is Calculated
Current monthly income (CMI) for means test purposes is defined by 11 U.S.C. § 101(10A) and is calculated differently from how income is typically understood. Several important rules govern CMI calculation:
Six-month lookback period: CMI is the average monthly income received from all sources during the six full calendar months immediately before the bankruptcy filing date, not the current monthly income at the time of filing. A filer who recently lost a job may have a CMI that reflects their prior higher salary even if their current income is much lower.
Income sources included: CMI includes wages, salary, tips, bonuses, commissions, business income, rental income, interest, dividends, pension payments, and most other regular payments received. It includes income received from non-filing spouses in certain circumstances.
Social Security excluded: Benefits under the Social Security Act — including Social Security retirement benefits, disability benefits (SSDI), and Supplemental Security Income (SSI) — are specifically excluded from CMI by statute. This exclusion is significant for filers whose primary income is Social Security.
Non-recurring income: One-time payments, lawsuit settlements, and other non-recurring income received during the six-month period are included in CMI, which can significantly raise the calculated figure even if the income is not ongoing.
| Income Type | Included in CMI? |
|---|---|
| Wages, salary, overtime, bonuses | Yes |
| Self-employment / business income (gross) | Yes |
| Rental income | Yes |
| Pension and retirement income | Yes |
| Interest and dividends | Yes |
| Social Security (all types) | No — explicitly excluded |
| Unemployment compensation | Yes (in most jurisdictions) |
| Child support / alimony received | Yes |
| Tax refunds received during period | Varies by court interpretation |
Part 2: The Disposable Income Calculation
Filers whose CMI exceeds the applicable state median must complete Part 2, which determines monthly disposable income by subtracting allowed expenses from CMI. The result determines whether the presumption of abuse arises.
If the calculated monthly disposable income is above the statutory threshold — which is set by formula in the Bankruptcy Code and adjusted periodically — the presumption of abuse arises. The current threshold amounts are published in the means test forms and on the U.S. Trustee Program website.
The presumption of abuse arising from Part 2 does not automatically prevent a Chapter 7 filing — it shifts the burden. The filer can rebut the presumption by demonstrating special circumstances that justify additional expense deductions not captured by the standard formula. Special circumstances must be itemized and documented.
Allowed Expense Deductions
The expense deductions in Part 2 of the means test are not the filer's actual expenses — they are standardized allowances set by the IRS and the U.S. Trustee Program, plus certain actual expenses for specific categories. This is a critical point that distinguishes the means test from a simple income-minus-expenses calculation.
Expense categories and their sources:
- IRS National Standards: Standardized allowances for food, clothing, personal care, and similar household expenses. Filers use the IRS table amounts based on household size — not their actual spending on those categories.
- IRS Local Standards: Standardized allowances for housing and utilities, and transportation, based on the filer's county and number of vehicles. Again, these are table amounts, not actual expenses.
- Actual expenses for certain categories: Health care, certain secured debt payments, priority debt payments, and taxes may be deducted at actual amounts rather than IRS standards, subject to documentation requirements.
The IRS standards and local standards used in the means test are available through the U.S. Trustee Program's means testing page. The Official Form 122A-2 — the Chapter 7 means test form — provides line-by-line instructions for each expense deduction category. Forms are available at uscourts.gov/forms/means-test-forms.
The IRS National and Local Standards used in the means test expense calculation were developed for tax compliance purposes and may not match a filer's actual cost of living in their area. If a filer's actual housing costs significantly exceed the local standard for their county, only the local standard is deductible in most circumstances — not the actual amount. This can result in a calculated disposable income figure that is higher than what the filer actually experiences, potentially triggering the presumption of abuse even for filers who genuinely have little money left after paying bills.
The Presumption of Abuse
When the means test calculation produces monthly disposable income above the statutory threshold, a presumption arises that allowing the Chapter 7 discharge would be an abuse of the bankruptcy process. This presumption can be triggered by a trustee or the U.S. Trustee's office, or may be raised by creditors.
The presumption of abuse arising from the means test calculation is not automatic denial of a Chapter 7 case — it is a rebuttable presumption. The filer can overcome it by showing "special circumstances," such as a serious medical condition or a call to active military duty, that justify deducting additional expenses from the calculation. Special circumstances must be itemized, documented, and supported by an explanation of why they create additional necessary expenses or reduced income not captured by the standard form.
If the presumption cannot be rebutted, the bankruptcy trustee or U.S. Trustee may file a motion to dismiss the case or convert it to Chapter 13. The court then determines whether dismissal or conversion is appropriate based on the filer's full financial circumstances.
The Official Forms and Where to Find Them
The means test is completed on official forms prescribed by the Judicial Conference of the United States and used in all federal bankruptcy courts. For individual Chapter 7 filers, the relevant forms are:
- Official Form 122A-1: Chapter 7 Statement of Your Current Monthly Income — used by all Chapter 7 filers to calculate CMI and complete Part 1
- Official Form 122A-1Supp: Statement of Exemption from Presumption of Abuse Under § 707(b)(2) — completed by filers who qualify for a means test exemption
- Official Form 122A-2: Chapter 7 Means Test Calculation — used by filers whose CMI exceeds the state median to complete Part 2
All official bankruptcy forms, including current versions of the means test forms and their instructions, are available at uscourts.gov/forms/means-test-forms. Current state median income figures and IRS expense standards used in the test are published by the U.S. Trustee Program at justice.gov/ust/means-testing and are updated several times per year.
The bankruptcy means test was established by BAPCPA in 2005 to determine whether individual consumer filers qualify for Chapter 7 or should instead file Chapter 13. Part 1 compares average monthly income over the preceding six months — excluding Social Security — to the state median for the filer's household size. Filers below the median generally qualify for Chapter 7 without Part 2. Filers above the median complete Part 2, which deducts standardized IRS expense allowances to calculate disposable income. Calculated disposable income above the statutory threshold creates a presumption of abuse that may result in the case being converted or dismissed. Current state median figures and official forms are at justice.gov/ust/means-testing and uscourts.gov/forms/means-test-forms.