If you are reading this page, you may have just run the numbers and found that your income is above the state median and your disposable income exceeds the threshold. That is understandably stressful. But failing the means test does not mean you cannot file bankruptcy. It means you cannot file Chapter 7 without overcoming an additional hurdle. You still have real options.
What "Failing" Actually Means
When you fail the means test, a "presumption of abuse" arises under 11 U.S.C. Section 707(b)(2). This is a legal presumption -- it means the court starts with the assumption that your Chapter 7 filing is an abuse of the system. But a presumption can be overcome.
The presumption does not automatically kill your case. It triggers a process:
- The U.S. Trustee reviews your filing
- The U.S. Trustee, the bankruptcy trustee, or a creditor may file a motion to dismiss for abuse
- You have the opportunity to respond -- either by rebutting the presumption or by voluntarily converting or dismissing
- The court decides
Option 1: Rebut the Presumption of Abuse
The presumption of abuse can be rebutted if you can demonstrate "special circumstances" that justify additional expenses or adjustments to income. The statute specifically mentions two examples:
- A serious medical condition
- A call or order to active duty in the Armed Forces
These are examples, not the only possibilities. Courts have considered other circumstances including:
- Recent job loss -- if you lost your job after the 6-month lookback period, your current income may be much lower than the means test reflects
- Divorce or separation -- a sudden change in household income and obligations
- Caring for a disabled family member -- expenses not captured by standard deductions
- Natural disaster or casualty loss
- Impending retirement -- if your income will drop significantly
The Bar Is High
Rebutting the presumption is not easy. You must document the special circumstances in detail, including the dollar amount of additional expenses or income adjustments, the reason the standard deductions do not adequately account for your situation, and evidence that the circumstances are beyond your control. A vague claim of hardship is not enough. Courts want specifics and documentation.
Option 2: File Chapter 13 Instead
This is the most common path for people who fail the means test. Chapter 13 has no means test. Anyone with regular income and debts within the statutory limits can file.
In Chapter 13, you propose a repayment plan and make monthly payments to a trustee for 3 to 5 years. At the end, remaining qualifying debts are discharged.
Chapter 13 Advantages
- No means test requirement
- Keep your property (house, car, etc.)
- Catch up on mortgage and car loan arrears through the plan
- Discharge at the end of the plan
- Protection from creditors during the plan period
Chapter 13 Realities
- You must make monthly payments for 3-5 years
- If your income is above the state median, the plan must run 5 years (60 months)
- Chapter 13 completion rates are historically low -- nationally, roughly 33-40% of Chapter 13 cases end in discharge
- You need enough regular income to fund the plan payments
Learn more about how the means test interacts with Chapter 13.
Option 3: Wait and File Later
The means test uses your average income over the 6 full calendar months before filing. If your income has recently dropped -- you lost a job, stopped working overtime, retired, or left a high-paying position -- waiting a few months can change your result.
As higher-income months roll out of the lookback window and lower-income months roll in, your CMI decreases. This is a legitimate strategy, not fraud. You are simply filing at a time that accurately reflects your current financial reality.
Example: Timing a Filing After Job Loss
You earned $6,000/month for years but were laid off in January. If you file in February, your 6-month lookback (August-January) includes 5 months at $6,000 and 1 month at $0. CMI = $5,000. But if you wait until July, the lookback (January-June) includes 1 month at $6,000 and 5 months at $0 (plus any unemployment). CMI drops dramatically.
Option 4: Voluntary Dismissal
If you have already filed and the presumption of abuse arises, you can request voluntary dismissal of your Chapter 7 case. This allows you to refile later (after the timing issue resolves) or to file Chapter 13 as a new case. There is no penalty for voluntary dismissal, though you lose the filing fee and any attorney fees already paid for the Chapter 7.
Military Exemptions
If you are a veteran or service member, special rules may exempt you entirely from the means test:
Disabled Veterans
Under Section 707(b)(2)(D)(i), the means test does not apply to disabled veterans whose indebtedness occurred primarily during a period of active duty or while performing homeland defense activity. This exemption requires:
- A disability (any rating)
- Debts incurred primarily during active duty or homeland defense
If you qualify, the means test simply does not apply -- no calculation needed, no presumption of abuse possible.
Reservists and National Guard
Under Section 707(b)(2)(D)(ii), members of reserve components or the National Guard are exempt if they were called to active duty or performed homeland defense activity for at least 90 days after September 11, 2001, and filed within a specified period after release from duty.
The Bottom Line
Failing the Means Test Is Not a Dead End
If you fail the means test, the most common outcomes are: (1) file Chapter 13 instead, (2) wait for your income to change and refile, or (3) rebut the presumption with special circumstances. Very few people who want debt relief are completely shut out. The means test redirects you -- it rarely stops you entirely.
Check Your Income First
Make sure you have the right numbers before concluding you fail. Many filers overestimate their income by including Social Security (which is excluded) or by not accounting for all deductions.
Not Legal Advice
This page provides general educational information. Whether you can rebut the presumption of abuse, qualify for a military exemption, or successfully file Chapter 13 depends on your specific circumstances. Consult a licensed bankruptcy attorney.