What is the bankruptcy means test?

The means test is a federal income calculation that decides whether you can file Chapter 7 bankruptcy. It works in two steps. First, it adds up your average monthly income over the six months before filing and compares it to the median income for a household of your size in your state. If you are below that median, you generally pass and can file Chapter 7. If you are above it, a second step looks at your disposable income -- your income minus allowed living expenses and certain debt payments -- to see whether you have enough left over to repay creditors. If you do, you are usually steered into a Chapter 13 repayment plan instead; if not, you may still qualify for Chapter 7. The median figures and expense standards are published by the U.S. Trustee Program and updated periodically, so the exact numbers change. This is general information, not legal advice; a bankruptcy attorney licensed in your state can run the calculation for your situation.

What the means test is for

Congress created the means test to make sure the fastest, most complete form of bankruptcy -- Chapter 7, which can wipe out qualifying unsecured debt in a matter of months -- goes to people who genuinely cannot repay, rather than to those who could. In plain terms, it is an income test that decides whether Chapter 7 is open to you, or whether you belong in a Chapter 13 repayment plan instead.

This is general information, not legal advice. The means test is one of the most technical parts of bankruptcy, and the official figures change, so have a bankruptcy attorney licensed in your state run it for your facts.

Step one: the median-income comparison

The first step is usually the only one that matters. You calculate your average monthly income over the six full months before filing (most income counts, with some exceptions), annualize it, and compare it to the median income for a household of your size in your state.

Below the median: you generally pass the means test automatically and can proceed with Chapter 7.
At or above the median: you move on to the second, more detailed step.

The median figures come from government data and are published and updated periodically by the U.S. Trustee Program, which is why no honest source can give you a single fixed number -- it depends on your state, your household size, and the current tables.

Step two: the disposable-income calculation

If your income is above the median, the test does not automatically disqualify you -- it asks a harder question: after your allowed living expenses and certain required debt payments, do you have enough disposable income left to repay a meaningful share of your debt?

If you have little or no disposable income after allowed expenses, you may still qualify for Chapter 7.
If you have enough left over, the law generally presumes you should repay through a Chapter 13 plan instead.

This step uses standardized expense allowances (many based on IRS local and national standards), which is why it is detailed enough that most filers have an attorney run it.

What the means test does not decide

It helps to know the limits of the test:

It does not block Chapter 13. Failing the means test for Chapter 7 does not bar you from bankruptcy -- it points you toward Chapter 13.
It is separate from exemptions. Whether you keep your house, car or retirement is an exemption question, not a means-test question.
Some filers are exempt from the test. Cases where debts are primarily business debts, and certain disabled veterans, may not have to take the means test at all.
It does not decide which debts get discharged. That is a different set of rules covered in what debts can't be discharged.

What to do with this

Because the median tables and expense standards change, treat any "means test calculator" result as a rough indicator, not a verdict. A bankruptcy attorney will run the official numbers for your district, and you can find the current figures and forms through the U.S. Trustee Program and at uscourts.gov.

And before bankruptcy of any chapter, it is worth seeing how it compares to other paths for your unsecured debt. Our neutral which debt relief option tool helps you weigh bankruptcy against settlement, a debt management plan and other options -- just remember a debt-settlement company is never a substitute for legal advice.