What Is the Means Test?
The means test was created by BAPCPA in 2005 to prevent abuse of Chapter 7 by high-income debtors. It compares your income to the median income for your household size in your state. If your income is below the median, you automatically qualify for Chapter 7. If above, you must complete the full means test calculation. Interactive means test tool.
Step 1: Calculate Current Monthly Income
Add up all income received in the 6 full calendar months before filing. Divide by 6. This is your "current monthly income" (CMI). Include wages, salary, business income, rental income, pension, Social Security (for some calculations), and contributions from others. Multiply by 12 to get annualized income.
Step 2: Compare to Median
Compare your annualized income to the median income for your household size in your state. These figures are published by the Census Bureau and updated every 6 months. Available at the UST website (justice.gov/ust). If below median, you pass -- file Chapter 7. If above, proceed to the full calculation.
Step 3: Full Means Test (Above Median Only)
Deduct allowed expenses using IRS National and Local Standards for food, housing, transportation, plus actual secured debt payments, priority debt payments, taxes, and insurance. The result is your "disposable income." If your monthly disposable income is below $166.67 (or total over 60 months is below $10,000), you pass.
Who Is Exempt?
Disabled veterans whose debts were primarily incurred during active duty or homeland defense. Debtors whose debts are primarily business debts (not consumer debts). If your annualized income is below the state median for your household size, you are exempt from the full calculation.
What If You Fail?
You can still file Chapter 13 -- the means test only applies to Chapter 7. You can wait for your income to decrease (6-month lookback resets). You can argue "special circumstances" under Section 707(b)(2)(B) -- such as a serious medical condition or military service obligation that justifies additional expenses.
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