If you are considering Chapter 7 bankruptcy, the means test is the first hurdle. It sounds intimidating, but it is a mechanical formula -- not a judgment of character. It simply asks whether your income is low enough to qualify for Chapter 7, or whether you should be in Chapter 13 instead.
The test is filed on Official Form 122A with your bankruptcy petition. Here is how each step works.
Step 1: Compare Your Income to the State Median
Calculate Your Current Monthly Income (CMI)
Current monthly income is not just your paycheck. It is the average of all income from all sources that you received during the 6 full calendar months before your filing date.
Example: The 6-Month Lookback
If you file on March 15, the lookback period covers September 1 through February 28. The month you actually file in does not count. Add up every dollar of income from those 6 months, then divide by 6 to get your CMI.
What Counts as Income
- Wages, salary, tips, bonuses, overtime, and commissions
- Net business income (gross revenue minus ordinary business expenses)
- Rental and real property income
- Interest, dividends, and royalties
- Pension and retirement income
- Unemployment compensation
- State disability insurance
- Regular contributions from others for household expenses (a partner paying half the rent counts)
- Alimony and child support received
What Does NOT Count
Social Security benefits of any kind are excluded from CMI -- retirement, SSDI, survivors benefits, SSI. So are payments to victims of war crimes, international terrorism, and domestic terrorism.
If Social Security is your primary income, you will almost certainly pass the means test. This is one of the most important exclusions in the calculation.
The Median Income Comparison
Once you have your CMI, multiply it by 12 to get an annualized figure. Then compare it to the median income for your state and household size. The U.S. Trustee Program publishes these figures at justice.gov/ust, updated roughly every six months based on Census Bureau data.
Below Median = Automatic Pass
If your annualized CMI is at or below the state median for your household size, the presumption of abuse does not arise. You qualify for Chapter 7 on income grounds. You still file Form 122A-1, but you do not need to complete Form 122A-2. For most filers, this is where the means test ends.
See current median income figures for all 50 states.
Step 2: Calculate Disposable Income (Above-Median Only)
If your income exceeds the state median, you must calculate your "disposable income" -- your CMI minus a specific set of allowed deductions. This is where Form 122A-2 comes in.
The deductions are not based on what you actually spend in most categories. Most are based on IRS standards and fixed allowances. This can work for or against you -- if your actual expenses are lower than the standards, you benefit. If higher, you are limited to the standard amount (with a few exceptions).
Types of Deductions
- IRS National Standards -- fixed amounts for food, clothing, and personal care based on household size
- IRS Local Standards -- amounts for housing/utilities and transportation based on your county and region
- Actual expenses -- taxes, health insurance, secured debt payments, childcare, and other specific categories where you deduct what you actually pay
For a detailed breakdown of every deduction category, see Means Test Deductions Explained.
The 60-Month Projection
After subtracting all allowed deductions from your CMI, you have your monthly disposable income. The test projects this over 60 months (5 years) to determine how much you could hypothetically repay unsecured creditors.
The Abuse Thresholds
- 60-month disposable income below $9,075 (less than $151.25/month) -- You pass. No presumption of abuse.
- Between $9,075 and $15,150 ($151.25 to $252.50/month) -- You pass only if the amount is less than 25% of your non-priority unsecured debts. Otherwise, presumption of abuse arises.
- $15,150 or more ($252.50+/month) -- Presumption of abuse. You fail the means test.
These thresholds are adjusted periodically. Check the current figures on the most recent version of Form 122A-2 or the U.S. Trustee's website.
A Complete Example
Meet Sarah -- Household of 3 in Ohio
Sarah earns $4,200/month gross. She also receives $300/month in child support. No other income.
- CMI: $4,200 + $300 = $4,500/month
- Annualized: $4,500 x 12 = $54,000
- Ohio median for household of 3: approximately $78,000
- Result: $54,000 is well below the median. Sarah passes at Step 1. She files Form 122A-1 only and qualifies for Chapter 7.
Meet James -- Household of 2 in California
James and his wife have combined income of $8,500/month ($102,000 annualized). The California median for household of 2 is approximately $83,000. James is above the median and must complete Step 2.
- CMI: $8,500/month
- IRS food/clothing allowance: -$1,100
- Housing/utilities (LA County standard): -$2,400
- Transportation (ownership + operating): -$800
- Taxes (federal + state + FICA): -$2,200
- Health insurance: -$450
- Car loan payment (60-month average): -$500
- Monthly disposable income: $8,500 - $7,450 = $1,050
- 60-month total: $1,050 x 60 = $63,000
- Result: $63,000 exceeds $15,150. Presumption of abuse arises. James should consider his options.
Note: these numbers are illustrative. Actual IRS standards and deductions vary by location, household size, and individual circumstances.
Timing Matters
Because the means test uses a 6-month average, your result can change depending on when you file. If you received a large bonus, worked overtime, or had seasonal income during the lookback period, waiting a few months can significantly lower your CMI.
This is not gaming the system. It is filing at a time that accurately reflects your current financial situation. Many attorneys advise clients on optimal filing timing based on their income history.
Strategic Timing Examples
- You received a $10,000 severance in January. If you file in July, that income is outside the lookback period (January through June file = July through December lookback).
- You worked holiday overtime in November and December. Filing in July instead of April means those high-income months drop out of your 6-month average.
- You lost your job 3 months ago. The sooner you file, the more the higher-income months weigh in your average. Waiting means more low-income months in the calculation.
What Happens After the Means Test
The means test is one gate, not the only gate. Even if you pass, the court can still dismiss your case for abuse under the "totality of the circumstances" standard in Section 707(b)(3). This is rare, but it can happen if the court believes you are abusing the system despite passing the mechanical test.
And if you do not pass, you still have options. See What Happens If You Fail the Means Test.
Check Where You Stand
Enter your state, household size, and income to see whether you are above or below the state median.
Not Legal Advice
This page provides general educational information about the bankruptcy means test under 11 U.S.C. Section 707(b). It is not legal advice. Consult a licensed bankruptcy attorney for advice on your specific situation.