What happens if I fail the means test?

If you fail the means test, a presumption of abuse arises under Section 707(b). This means the court presumes that filing Chapter 7 would be an abuse of the bankruptcy system. Your case may be dismissed or converted to Chapter 13 unless you can rebut the presumption by showing special circumstances like serious medical conditions or military service. Many people who fail the means test file Chapter 13 instead.

What Is the Bankruptcy Means Test?

Q: What is the bankruptcy means test?

The means test is a calculation under Section 707(b) of the Bankruptcy Code that determines whether you qualify to file Chapter 7 bankruptcy. It compares your income over the past 6 months to the median income for a household of your size in your state. If your income is below the median, you pass automatically. If above, a more detailed calculation of disposable income determines whether filing Chapter 7 would be presumed abusive.

An income-based test that determines whether you qualify for Chapter 7 or must file Chapter 13 instead.

Purpose of the means test

The means test was created by the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005. Its purpose is to prevent high-income debtors from using Chapter 7 to discharge debts when they could afford to repay some through a Chapter 13 plan.

The test is codified in Section 707(b) of the Bankruptcy Code and applies to individual debtors filing Chapter 7 whose debts are primarily consumer debts.

How the means test works

Step 1: Compare income to state median

Calculate your current monthly income (CMI) -- the average of your gross income over the 6 full calendar months before filing. Multiply by 12 and compare to the median income for a household of your size in your state.

Below median: You pass. No further calculation needed. You can file Chapter 7.
Above median: Proceed to Step 2.

Step 2: Calculate disposable income

If above median, subtract allowable expenses (using IRS standards plus actual expenses for certain categories) from your CMI. If your disposable income is too high, a "presumption of abuse" arises.

The presumption of abuse threshold

A presumption of abuse arises if your monthly disposable income, multiplied by 60, equals $9,075 or more (i.e., you have at least $151.25/month in disposable income). If between $9,075 and $15,150, abuse is presumed only if that amount would pay at least 25% of your unsecured debts. These thresholds are adjusted periodically.

Who is exempt from the means test?

Debtors with primarily business debts -- The means test only applies when consumer debts exceed 50% of total debts
Disabled veterans -- Veterans whose debts were incurred primarily during active duty or homeland defense are exempt
Reservists and National Guard -- Members called to active duty for 90+ days in the preceding 540 days are exempt

What counts as income?

The means test uses "current monthly income" which includes almost all sources:

Wages, salary, tips, bonuses, commissions
Business income (net)
Rental income
Interest, dividends, royalties
Pension and retirement income
Unemployment compensation
Regular contributions from others (including a non-filing spouse's income)

Not included: Social Security benefits and payments to victims of war crimes or terrorism.

If you fail the means test

Failing the means test does not necessarily mean you cannot file bankruptcy. Your options include:

File Chapter 13 instead -- The means test does not apply to Chapter 13, though your income determines your plan length (3 or 5 years)
Rebut the presumption -- Show "special circumstances" such as serious medical conditions, military service, or caregiving responsibilities
Wait and refile -- If your income has dropped (job loss, retirement), waiting may change the calculation since it uses 6-month averages

The means test form

The means test calculation is filed on Official Form 122A (Chapter 7) or 122C (Chapter 13). These are complex multi-page forms with IRS expense standards, allowed deductions, and income calculations. Errors on these forms can result in case dismissal or conversion. Most filers use an attorney or specialized software to complete them.

Learn about the differences between Chapter 7 and Chapter 13.

Chapter 7 Overview

Related resources

Chapter 7 Overview -- Liquidation basics
Chapter 13 Overview -- Repayment plan basics
How Much Does Bankruptcy Cost? -- Filing fees and expenses
Before You File -- Pre-filing preparation
Do I Need a Lawyer? -- Representation considerations

This page provides general information based on publicly available federal court records. It does not constitute legal advice. Consult a licensed attorney for advice on your specific situation.

This tool is free and open-source. Donations fund PACER access fees and our goal of forming a 501(c)(3) nonprofit for bankruptcy court transparency.

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