The means test calculation follows a specific formula set out in the Bankruptcy Code. Here is the step-by-step process.
Step 1: Calculate Your Current Monthly Income (CMI)
Add all gross income received by you and your spouse (if filing jointly or if married) during the 6 full calendar months before your filing date. Include wages, salary, tips, bonuses, overtime, self-employment income, rental income, pension/retirement income, unemployment compensation, and any other regular income. Social Security income is excluded.
Divide the total by 6 to get your Current Monthly Income.
Step 2: Compare to State Median
Multiply your CMI by 12 to get your annualized income. Compare this to the Census Bureau median income for your state and household size. These figures are updated periodically and published by the U.S. Trustee Program. If your annualized income is at or below the median, you pass the means test and qualify for Chapter 7.
Step 3: If Above Median, Calculate Disposable Income
If your income exceeds the median, complete the full means test form (Official Form 122A-2). Subtract allowed expenses using IRS National and Local Standards for housing, food, transportation, and other categories. Also deduct actual secured debt payments, priority debt payments, and certain other expenses.
Step 4: Apply the Threshold
If your remaining monthly disposable income multiplied by 60 is less than $9,075, you pass. If it is more than $15,150, you fail. If it falls between those figures, additional analysis is required comparing disposable income to your total unsecured debt.
The means test form is Official Form 122A-1 (below median) or 122A-2 (above median). Many courts and the U.S. Trustee website provide blank forms and instructions.