Means Test Vocabulary

Every term on the bankruptcy means test explained in plain language. 30+ definitions covering income calculations, deduction categories, IRS standards, and the forms you will encounter.

Income Terms

Current Monthly Income (CMI)

The average of all income from all sources during the 6 full calendar months before filing, divided by 6. Defined in 11 U.S.C. 101(10A). Includes wages, salary, tips, bonuses, overtime, self-employment income, rental income, pension and retirement income, unemployment compensation, and regular contributions from others toward household expenses. Does NOT include Social Security benefits or payments to victims of war crimes or terrorism.

Annualized Income

Your CMI multiplied by 12. This number is compared to the state median income for your household size to determine whether you are "above median" or "below median." This comparison is the gateway to the entire means test calculation.

Median Family Income

The midpoint income for a household of your size in your state, published by the Census Bureau and updated periodically by the U.S. Trustee Program. If your annualized income is below median, you generally qualify for Chapter 7 without completing the full means test. Median figures vary dramatically by state -- for example, a family of 4 in Mississippi has a much lower median than a family of 4 in Connecticut.

Above Median Income

Your annualized CMI exceeds the state median for your household size. In Chapter 7, you must complete the full means test deduction calculation to see if you pass. In Chapter 13, your plan must last 5 years (not 3), and you must commit all projected disposable income to the plan. See the above median income guide.

Below Median Income

Your annualized CMI is at or below the state median for your household size. In Chapter 7, the presumption of abuse does not arise -- you generally qualify. In Chapter 13, your plan can be as short as 3 years. You still complete Form 122A-1 or 122C-1, but do not need the full deduction calculation.

Marital Adjustment

If you are married and filing individually (not jointly), you may deduct your non-filing spouse's income that is not regularly contributed to household expenses. Calculated on Form 122A-1, Line 13 (or 122C-1, Line 13). This prevents a non-filing spouse's separately maintained income from inflating your CMI.

CMI Calculation Period (Lookback Period)

The 6 full calendar months immediately preceding the month of filing. If you file on March 15, the lookback period is September 1 through February 28. This is why filing date timing matters -- a bonus or overtime in the lookback period raises your CMI. Some filers time their petition to exclude high-income months.

Deduction Terms

IRS National Standards

Fixed monthly allowances set by the IRS for food, clothing, housekeeping supplies, personal care, and miscellaneous expenses. You receive these deductions regardless of what you actually spend. Based on household size. For a single person, approximately $785/month; for a family of 4, approximately $1,697/month. Updated annually. See the deductions guide.

IRS Local Standards -- Housing and Utilities

County-specific allowances for housing and utility costs. Separate amounts for mortgage/rent and for utilities/maintenance. Based on household size and the county where you live. These vary dramatically -- a debtor in Manhattan gets a much higher housing allowance than a debtor in rural Kansas.

IRS Local Standards -- Transportation

Two components: ownership costs (if you have a car payment, approximately $588/month for one car, $1,176 for two) and operating costs (fuel, maintenance, insurance -- based on your Census region, approximately $266-$338/month per car). You only get the ownership allowance if you actually have a car payment or lease.

Allowable Deductions

The total of all expenses the means test permits you to subtract from CMI. Includes IRS standards (national and local), taxes, mandatory payroll deductions, health insurance, childcare, education for dependent children, court-ordered payments, secured debt payments over 60 months, priority debt over 60 months, and the Chapter 13 trustee fee. The more you can legitimately deduct, the more likely you are to pass the means test.

Other Necessary Expenses (ONEs)

Additional deductions beyond the IRS standards that the means test allows. Includes taxes (income, Social Security, Medicare), mandatory payroll deductions (retirement contributions, union dues), term life insurance, court-ordered payments (child support, alimony), education expenses for dependent children (up to $156.25/month per child), childcare, healthcare costs above the IRS standard, and telecommunications ($75/month combined for phone/internet).

Secured Debt Payment Deduction

Your total payments on secured debts (mortgages, car loans, tax liens) that will come due in the next 60 months, divided by 60. This gives you a monthly deduction for these payments. Includes both current payments and any arrearages you plan to cure. This deduction often makes the difference between passing and failing the means test.

Priority Claim Deduction

Total priority debts (domestic support arrears, certain tax debts, employee wage claims) divided by 60. Priority debts must be paid in full in Chapter 13, so the means test allows this deduction from disposable income.

Chapter 13 Administrative Expense

The estimated trustee fee multiplied by your projected plan payments. The standing trustee in your district takes a percentage (typically 3-10%) of plan payments as an administrative fee. This is deductible on the means test for Chapter 13 filers.

Legal Concepts

Presumption of Abuse

Under 11 U.S.C. 707(b)(2), if you are above median income and your means test shows monthly disposable income (after deductions) x 60 equals $9,075 or more, the court presumes your Chapter 7 filing is abusive. Also arises if the 60-month total is at least $5,475 and would pay 25%+ of nonpriority unsecured claims. If presumption arises, the U.S. Trustee can move to dismiss unless you demonstrate special circumstances.

Special Circumstances

Under 11 U.S.C. 707(b)(2)(B), a debtor can rebut the presumption of abuse by demonstrating special circumstances that justify additional expenses or adjustments to CMI for which there is no reasonable alternative. Examples: serious medical condition, military service obligations, job loss after the lookback period. Must be documented and the court must find them credible. This is a high bar -- not every unusual expense qualifies.

Disposable Income (Projected)

CMI minus all allowable deductions. In Chapter 7, this determines whether the presumption of abuse arises. In Chapter 13, this determines the minimum amount you must pay to unsecured creditors through your plan. The lower your projected disposable income, the less you pay in Chapter 13.

Applicable Commitment Period

The length of your Chapter 13 plan. Below median: 3 years (36 months). Above median: 5 years (60 months). The court can approve a shorter plan for below-median debtors. Above-median debtors must commit to the full 5 years unless they pay 100% of unsecured claims sooner.

Household Size

The number of people in your household for means test purposes. This affects your median income comparison and your IRS standard deductions. Courts disagree on how to count household size -- some use the Census Bureau definition (everyone living in the home), others use the IRS dependent definition, and others use an "economic unit" test. Check your district's interpretation. See the household size guide.

Totality of the Circumstances

Under 11 U.S.C. 707(b)(3), even if you pass the means test mathematically, the court can still dismiss your Chapter 7 case if the totality of your financial circumstances demonstrates abuse. This is a separate, subjective analysis the court can apply -- for example, if you have significant equity in non-exempt assets or your budget reveals unreasonable spending patterns.

Safe Harbor

If your annualized CMI is at or below the state median for your household size, the presumption of abuse cannot arise under the means test formula. You are in the "safe harbor" -- but the court can still review your case under the totality-of-the-circumstances test (707(b)(3)).

Forms

Form 122A-1 (Chapter 7 Statement of Current Monthly Income)

Required for all individual Chapter 7 filers. Calculates your CMI and compares it to the state median. If below median, you stop here. If above median, proceed to Form 122A-2.

Form 122A-2 (Chapter 7 Means Test Calculation)

Required only for above-median Chapter 7 filers. Calculates all allowable deductions and determines whether the presumption of abuse arises. This is the full means test calculation.

Form 122C-1 (Chapter 13 Statement of Current Monthly Income and Calculation of Commitment Period)

Required for all individual Chapter 13 filers. Calculates CMI and determines whether the applicable commitment period is 3 years or 5 years.

Form 122C-2 (Chapter 13 Calculation of Disposable Income)

Required for above-median Chapter 13 filers. Calculates the projected disposable income that must be paid to unsecured creditors through the plan.

Schedule I (Current Income)

A separate form from the means test. Lists your actual current monthly income at the time of filing. May differ from CMI because CMI uses a 6-month average while Schedule I shows current income. Courts use Schedule I for Chapter 13 feasibility analysis.

Schedule J (Current Expenditures)

Lists your actual current monthly expenses. Combined with Schedule I to show your actual monthly budget. The difference between income (Schedule I) and expenses (Schedule J) is your actual monthly net income -- which affects plan feasibility in Chapter 13.

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