What Is Means Testing and How It Works in Bankruptcy

The bankruptcy means test is a two-part income-and-expense calculation that decides whether you can file Chapter 7 or must instead repay creditors through Chapter 13. First it compares your income to the median for your household size in your state. If you’re under, you pass. If you’re over, a second calculation looks at your allowed expenses to see whether you have enough left over each month to fund a repayment plan. Failing doesn’t lock you out of bankruptcy. It usually redirects you into Chapter 13, where you pay creditors over three to five years instead of getting a Chapter 7 discharge.

Who Has to Take the Test

The means test applies to individual debtors whose debts are “primarily consumer debts.” The statute reads “primarily” as more than half, so if the majority of your total debt came from business activity rather than personal spending, the test doesn’t apply to your case.¹

Classification turns on what the borrowed money was used for when the debt was first incurred, not what name is on the account. Rental-property mortgages, personal guarantees of business loans, inventory purchases, and tax debts are commonly treated as non-consumer debt. Most courts add up the dollar amounts: if non-consumer debt exceeds 50% of your total, you’re exempt from means testing.

Two groups of service members are also excused. Disabled veterans whose debts were primarily incurred during active duty or homeland defense activity are fully exempt regardless of income. National Guard and reserve members called to active duty for at least 90 days after September 11, 2001 get a temporary exemption that runs through their service and for 540 days afterward.¹

Step One: Your Income Against the State Median

The test starts with a figure called your current monthly income (CMI). It isn’t what you earned last month. It’s the average of your gross income from all sources across the six full calendar months before you file. File on September 15, and the window runs from March 1 through August 31.²

CMI sweeps in almost everything: wages, salary, bonuses, overtime, business income, rental income, interest, dividends, unemployment compensation, and regular contributions from a roommate or partner toward household expenses. You report it on Official Form 122A-1.³

Some income sources are carved out. Social Security benefits are excluded entirely, which matters a great deal for retirees. Military disability compensation, combat-related pay, and survivor benefits paid under federal military statutes are excluded, as are payments received as a victim of war crimes, crimes against humanity, or terrorism.²

Multiply your CMI by 12 and compare that annual figure to the median income for your household size in your state. The U.S. Trustee Program publishes those medians and updates them periodically from Census Bureau data. They vary widely. For cases filed on or after April 1, 2026, a single earner’s annual median runs from about $64,000 in Alabama to roughly $86,000 in Washington state. A four-person household ranges from about $107,000 to over $160,000 depending on location.⁴

Come in below the median and you pass. Your Chapter 7 case proceeds without further income scrutiny. Step one is designed to filter out lower-income filers who clearly can’t fund a repayment plan.

Step Two: Disposable Income if You’re Above Median

Above the median, the test moves to a detailed expense analysis on Official Form 122A-2. The form doesn’t simply ask what you spend. It combines standardized government allowances with a limited set of your actual costs to produce what the court considers your true disposable income.⁵

IRS National Standards set fixed allowances for food, clothing, household supplies, and personal care by family size. You deduct those amounts whether or not they match what you spend. IRS Local Standards then cover housing and transportation, varying by county and metro area to reflect regional costs. Housing is split into two pieces: insurance and operating expenses, and mortgage or rent.⁵

On top of the standardized figures, the form allows deductions for certain actual expenses: health and life insurance premiums, mandatory payroll deductions like union dues, childcare, out-of-pocket medical costs above the IRS allowance, care for elderly or disabled family members, and payments on secured debts. For secured debts, the form averages what you contractually owe over the 60 months after filing and divides by 60.⁵

One item catches filers off guard. Repayments on a 401(k) loan generally cannot be deducted on the Chapter 7 means test. Because a 401(k) loan is technically borrowing from yourself, the court doesn’t treat those payments as an allowable expense, and a large 401(k) loan balance can push someone over the line.

The Presumption of Abuse

Subtract every allowed deduction from your CMI and you get your monthly disposable income. The court multiplies that by 60 (five years of hypothetical payments) and measures the result against two dollar thresholds that are adjusted for inflation every three years. As of April 1, 2025, the thresholds are $10,275 and $17,150.⁶

Below $10,275 over 60 months (roughly $171 or less per month in disposable income), no presumption of abuse. You pass and can proceed with Chapter 7.
At or above $17,150 over 60 months (about $286 per month), the presumption applies automatically, regardless of how much unsecured debt you carry.
Between the two, the presumption applies only if the five-year total equals or exceeds 25% of your nonpriority unsecured debts. The more unsecured debt you have, the more room you get.

When the presumption of abuse kicks in, the court assumes you have enough income to fund a repayment plan and shouldn’t be allowed to wipe out debts through Chapter 7.¹

Rebutting the Presumption

Triggering the presumption doesn’t automatically end your Chapter 7 case. You can overcome it by showing “special circumstances” that make your financial picture worse than the numbers suggest. The statute names two examples: a serious medical condition and a call to active military duty. Courts read the concept in varying ways, some broadly and some narrowly.¹

To make the argument, you itemize each additional expense or income adjustment you’re claiming, provide documentation for each one, and give a signed, sworn explanation of why the circumstance is both necessary and unavoidable. If the adjustments drop your disposable income below the abuse threshold, the presumption is rebutted and Chapter 7 can proceed.¹

What Happens If You Fail

If the presumption stands and you can’t rebut it, your case will either be dismissed or, with your consent, converted to Chapter 13. Chapter 13 is a repayment plan: you make monthly payments to a trustee, who distributes the money to creditors. It doesn’t wipe your debts clean the way Chapter 7 does, but it lets you keep property and catch up on secured obligations like mortgage arrears.⁷

Your means test results also control how long a Chapter 13 plan runs. If your current monthly income is below the state median, the minimum plan is three years, though a court can approve longer for cause. If your income is above the median, you’re locked into five years. No plan can exceed five years.⁷

1
Office of the Law Revision Counsel. 11 U.S. Code 707 – Dismissal of a Case or Conversion to a Case Under Chapter 11 or 13
2
Office of the Law Revision Counsel. 11 U.S. Code 101 – Definitions
3
United States Department of Justice. Means Testing
4
United States Department of Justice. Median Family Income Table – On or After April 1, 2026
5
United States Courts. Official Form 122A-2 – Chapter 7 Means Test Calculation
6
Federal Register. Adjustment of Certain Dollar Amounts Applicable to Bankruptcy Cases
7
United States Courts. Chapter 13 – Bankruptcy Basics