Means Test for Bankruptcy Eligibility: Legal Requirements
The bankruptcy means test is a statutory screening mechanism that determines whether an individual debtor qualifies to file under Chapter 7 of the Bankruptcy Code or must instead proceed under Chapter 13. Enacted through the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), the test applies a formula derived from income, household size, and allowable expenses to identify filers who have sufficient disposable income to repay creditors. Understanding its structure is essential to navigating individual bankruptcy eligibility under Title 11 of the United States Code.
Definition and scope
The means test is codified at 11 U.S.C. § 707(b), within the Bankruptcy Code, Title 11. It applies exclusively to individual debtors whose debts are primarily consumer debts — debts incurred for personal, family, or household purposes, as distinguished from business debts.
The test operates in two sequential stages:
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Median income comparison — The debtor's current monthly income (CMI), averaged over the six calendar months preceding the petition date, is compared against the median income for a household of equivalent size in the debtor's state. The U.S. Trustee Program publishes these state median income figures, derived from U.S. Census Bureau data, and updates them periodically (U.S. Trustee Program Means Testing Data).
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Disposable income calculation — If CMI exceeds the applicable state median, the debtor must complete the full means test form (Official Form 122A-2), deducting allowable expenses set by Internal Revenue Service National and Local Standards, as well as certain actual monthly expenses, to determine monthly disposable income.
Debtors whose primary debts are non-consumer in nature — such as business obligations — are exempt from the means test's application under § 707(b)(1). Disabled veterans whose indebtedness arose primarily during active-duty service also qualify for a statutory exemption under 11 U.S.C. § 707(b)(2)(D).
How it works
The means test calculation follows a defined sequence governed by Official Bankruptcy Forms 122A-1 and 122A-2, administered under the oversight of the U.S. Trustee Program.
Step 1 — Calculate Current Monthly Income (CMI)
CMI is defined under 11 U.S.C. § 101(10A) as the average monthly income from all sources received during the six-month lookback period. It excludes Social Security benefits and certain payments to crime victims. The six-month average is then annualized (multiplied by 12) for median comparison purposes.
Step 2 — Compare to State Median Income
The annualized CMI is compared against the applicable state median income figure for the debtor's household size. If CMI falls at or below the median, the debtor passes the means test automatically and may proceed with a Chapter 7 petition without further income analysis.
Step 3 — Apply Allowable Expense Deductions (if above median)
Debtors above the median threshold complete Form 122A-2. Allowable deductions include:
- IRS National Standards for food, clothing, housekeeping, and personal care
- IRS Local Standards for housing, utilities, and transportation
- Actual expenses for categories such as health insurance, childcare, and court-ordered payments
- Secured debt payment obligations and priority debt payments
Step 4 — Determine Monthly Disposable Income
After deductions, the resulting figure is monthly disposable income (MDI). If MDI multiplied by 60 exceeds $14,425, or if it exceeds 25% of the debtor's nonpriority unsecured claims (with a $8,575 floor), a presumption of abuse arises under 11 U.S.C. § 707(b)(2) (11 U.S.C. § 707(b)(2)). Dollar thresholds are subject to adjustment by the Judicial Conference of the United States every three years under 11 U.S.C. § 104.
A presumption of abuse does not automatically bar Chapter 7 filing but shifts the burden to the debtor to rebut the presumption with evidence of special circumstances, such as a serious medical condition or a call to active military duty.
Common scenarios
Scenario 1 — Below-median filer
A single-person household in Ohio with an annualized CMI below the applicable Ohio single-person median income passes Stage 1 and need not complete the expense deduction form. The bankruptcy petition filing proceeds without a presumption of abuse.
Scenario 2 — Above-median filer with high secured debt
A married couple in Texas with CMI above the Texas two-person median may still pass the full means test if substantial secured debt payments — such as a mortgage and vehicle loans — reduce MDI below the abuse threshold. The secured payment deductions permitted under IRS Local Standards often play a determinative role.
Scenario 3 — Chapter 13 conversion
A debtor who fails the Chapter 7 means test may convert the analysis into a Chapter 13 income calculation. Under Chapter 13, above-median debtors must commit disposable income — calculated using the same means test expense standards — to a repayment plan lasting 60 months rather than the 36-month minimum available to below-median debtors (11 U.S.C. § 1325(b)(4)).
Scenario 4 — Business debt exception
A sole proprietor whose debts consist primarily of business obligations — inventory loans, commercial leases, trade payables — is not subject to the means test's consumer debt provisions, even if the petition is filed as an individual. The distinction between consumer and business debt is a threshold factual determination reviewed by the bankruptcy trustee.
Decision boundaries
The means test creates three distinct outcome categories that define filing options:
| Outcome | Condition | Effect |
|---|---|---|
| Automatic pass | CMI ≤ state median | No presumption of abuse; Chapter 7 available |
| Conditional pass | CMI > state median; MDI below abuse threshold after deductions | Chapter 7 available; no presumption |
| Presumption of abuse | CMI > state median; MDI exceeds statutory threshold | Rebuttable presumption; case may be dismissed or converted |
Chapter 7 vs. Chapter 13 — means test contrast
The means test functions differently across chapters. For Chapter 7, it serves as a gatekeeping mechanism — failure triggers a presumption that can result in dismissal under § 707(b). For Chapter 13, the same income and expense framework determines the required plan payment amount and duration, rather than barring access entirely. This asymmetry reflects the legislative design of BAPCPA, which incentivizes repayment plans over liquidation for higher-income debtors.
The U.S. Trustee Program and private bankruptcy trustees both have standing to bring motions to dismiss for abuse under § 707(b)(2) or under the general totality-of-circumstances standard in § 707(b)(3), which does not rely on the means test formula. A debtor who passes the formula test may still face a § 707(b)(3) motion if the filing appears abusive based on the debtor's full financial picture.
Special categories of debtors — including those filing under Chapter 12 for family farmers and municipalities under Chapter 9 — are not subject to the means test. Businesses filing under Chapter 11 also fall outside its scope, as the test is limited to individual consumer filers under § 707(b).
References
- 11 U.S.C. § 707(b) — Dismissal for Abuse (U.S. House Office of the Law Revision Counsel)
- U.S. Trustee Program — Means Testing Data and State Median Income Figures (U.S. Department of Justice)
- Official Bankruptcy Forms 122A-1 and 122A-2 (United States Courts)
- Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. 109-8 (Congress.gov)
- IRS National and Local Standards for Allowable Expenses (Internal Revenue Service)
- 11 U.S.C. § 101(10A) — Definition of Current Monthly Income (U.S. House Office of the Law Revision Counsel)
- U.S. Census Bureau — Median Family Income Data Used in Bankruptcy Means Testing