Means Test for Bankruptcy Eligibility Explained
The bankruptcy means test is a formal income-based calculation that determines whether an individual qualifies to file under Chapter 7 of the U.S. Bankruptcy Code or must instead pursue a repayment plan under Chapter 13. Established by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), the test was designed to restrict Chapter 7 access to filers who genuinely lack the ability to repay debts. Understanding this mechanism is essential to evaluating which form of bankruptcy relief, if any, may be available in a given financial situation.
Definition and scope
The means test is codified at 11 U.S.C. § 707(b), which authorizes a court to dismiss a Chapter 7 case filed by an individual with primarily consumer debts if granting relief would constitute "substantial abuse." The test operationalizes that standard through a two-phase mathematical formula applied to the filer's recent income and allowable expenses.
The scope of the means test covers individual debtors filing primarily consumer debts. It does not apply to:
- Disabled veterans whose debts were incurred primarily during active-duty or homeland defense service (11 U.S.C. § 707(b)(2)(D))
- Debtors whose debts are primarily non-consumer (business) in nature
- Chapter 13 filers (though income limits still affect plan length under that chapter)
The U.S. Trustee Program, a component of the Department of Justice, administers the oversight structure through which means test compliance is reviewed in bankruptcy courts across 88 of the 94 federal judicial districts (the six remaining districts fall under the Bankruptcy Administrator program, administered by the federal judiciary itself).
For a broader comparison of how bankruptcy interacts with other debt resolution paths, see Bankruptcy vs Debt Settlement.
How it works
The means test proceeds in two sequential phases.
Phase 1 — Current Monthly Income (CMI) vs. State Median Income
The filer calculates "current monthly income" (CMI), defined under 11 U.S.C. § 101(10A) as the average monthly income received during the 6 calendar months before the filing date. This figure is then annualized and compared against the median family income for the filer's state and household size.
The U.S. Trustee Program publishes updated median income tables derived from U.S. Census Bureau data. These figures are updated periodically; as of the tables applicable to cases filed on or after November 1, 2024, the median annual income for a single-person household in Texas, for example, is listed by the U.S. Trustee Program's published schedule.
- If the filer's annualized CMI falls at or below the state median, the filer presumptively passes Phase 1 and is eligible for Chapter 7.
- If the filer's annualized CMI exceeds the state median, Phase 2 is required.
Phase 2 — Disposable Income Calculation (Official Form 122A-2)
Phase 2 applies allowed expense deductions to CMI to determine monthly disposable income. Allowed deductions include:
- IRS National and Local Standards for housing, food, transportation, and personal care (sourced from the IRS Collection Financial Standards)
- Actual monthly secured debt payments (mortgage, car loan)
- Actual monthly priority debt payments (taxes, domestic support obligations)
- Certain other allowed expenses (health insurance, care for elderly or disabled household members)
If monthly disposable income exceeds the threshold set at 11 U.S.C. § 707(b)(2)(A)(i) — which, under the formula, generally means projected 5-year disposable income is sufficient to pay 25% or more of nonpriority unsecured debts (or exceeds a fixed dollar floor) — a "presumption of abuse" arises and the Chapter 7 case may be dismissed or converted.
Filers complete this calculation using Official Bankruptcy Form 122A-1 and Form 122A-2, published by the U.S. Courts.
For context on how the Automatic Stay in Bankruptcy interacts with the period before and after filing, that page addresses procedural protections that attach at the moment of filing regardless of test outcome.
Common scenarios
Scenario A — Below-Median Filer
A single individual in Ohio with an annualized CMI of $38,000 whose state median for a one-person household (per U.S. Trustee tables) is approximately $52,000 passes Phase 1 automatically. No further means test calculation is required for eligibility purposes.
Scenario B — Above-Median Filer Who Still Qualifies
A household of four in California earns $110,000 annually, exceeding the state median for that household size. Phase 2 applies. After deducting allowable IRS standards, an above-average mortgage payment, and health insurance premiums, their calculated monthly disposable income falls below the statutory threshold. The presumption of abuse does not arise, and Chapter 7 remains available.
Scenario C — Above-Median Filer Who Does Not Qualify
The same household earns $140,000 with minimal secured debt and low housing costs. Phase 2 yields monthly disposable income above the threshold, triggering the presumption of abuse. The filer must either rebut the presumption by demonstrating "special circumstances" under 11 U.S.C. § 707(b)(2)(B) or convert to a Chapter 13 repayment plan.
Filers who cannot pass the means test should review Chapter 13 Bankruptcy Basics and consider whether a structured repayment plan aligns with their financial profile. Those weighing non-bankruptcy alternatives may also find Debt Management Plans a relevant comparison.
Decision boundaries
The means test produces one of three operative outcomes:
| Outcome | Trigger | Effect |
|---|---|---|
| Passes (no presumption) | CMI ≤ state median, or Phase 2 disposable income below threshold | Chapter 7 filing proceeds without means-test challenge |
| Presumption of abuse arises | Phase 2 disposable income exceeds statutory threshold | U.S. Trustee or creditor may file motion to dismiss; filer may rebut |
| Case dismissed or converted | Presumption not rebutted and special circumstances not proven | Chapter 7 dismissed; may convert to Chapter 13 under 11 U.S.C. § 707(b)(1) |
Chapter 7 vs. Chapter 13 boundary: The means test is the primary statutory gatekeeper distinguishing Chapter 7 (liquidation, typically completed in 3–6 months) from Chapter 13 (3- to 5-year repayment plan). Above-median filers who fail Phase 2 are not categorically barred from bankruptcy relief — they are redirected to Chapter 13. See Chapter 7 Bankruptcy Basics for a detailed breakdown of the liquidation process.
Special circumstances rebuttal: Under 11 U.S.C. § 707(b)(2)(B), a filer may rebut the presumption by documenting special circumstances — such as a serious medical condition or a call or order to active-duty military service — that justify additional expense deductions not captured by IRS standards. The filer must provide itemized documentation and an explanation under penalty of perjury.
Income timing rules: Because CMI uses a strict 6-month lookback, the timing of filing relative to a job loss, income reduction, or one-time payment can materially affect Phase 1 results. A lump-sum severance payment received 3 months before filing will inflate the CMI calculation even if the filer is currently unemployed.
The interaction between the means test and State Exemptions in Bankruptcy is also relevant to overall strategic planning, as passing the means test to access Chapter 7 determines which asset protection rules will govern the liquidation estate.
References
- 11 U.S.C. § 707(b) — Bankruptcy Code, Dismissal for Abuse — U.S. House Office of the Law Revision Counsel
- U.S. Trustee Program — Means Testing Information and Median Income Tables — U.S. Department of Justice
- [Official Bankruptcy Forms 122A-1 and 122A-