What the means test does

The means test is a calculation the bankruptcy court uses to decide whether you can file for Chapter 7 bankruptcy, which erases most of your unsecured debts. It compares your income to the median income in your state for a household your size. If your income falls below that median, you pass the test and can move forward with Chapter 7. If your income is above the median, the test continues to a second stage that looks at your expenses and disposable income — money left over after you pay necessary costs of living.

The test exists because Chapter 7 is a discharge: the court wipes away debts you cannot pay. Congress created the means test in 2005 to prevent people with genuine ability to repay from using Chapter 7 when Chapter 13 (a repayment plan) would be more appropriate. Understanding how it works helps you know what documents to gather and what the trustee assigned to your case will be examining.

Key Takeaways

  • The means test compares your household income over the past six months to your state's median income for your household size.
  • If you earn below the median, you pass the first stage and can proceed with Chapter 7 without further income scrutiny.
  • If you earn above the median, the test moves to a second stage that deducts allowed living expenses and calculates whether you have disposable income to repay debts.
  • You must file official bankruptcy forms that include tax returns, pay stubs, and bank statements — the trustee will verify these numbers.
  • Passing or failing the means test does not determine whether you should file Chapter 7; it only determines whether the court will let you.

How the income comparison works

The first part of the means test uses your average monthly income from the six months before you file. This includes wages, self-employment income, rental income, Social Security, unemployment benefits, and any other regular money coming in. You add up all deposits and divide by six to get the monthly average, then multiply by 12 to get your annual income for the test.

The court then looks up the median income for your state and household size. These numbers are published by the U.S. Trustee Program and updated regularly. A single person in one state might have a median of $35,000 per year, while a family of four in another state might have a median of $75,000. If your calculated income is below that median, you pass the means test and Chapter 7 is available to you.

The income figure used is gross income before taxes and deductions. If you earned $4,000 per month but paid $800 in taxes and $200 in health insurance, the test counts $4,000, not $3,000. This is why people sometimes find they are above the median even though their take-home pay feels tight.

What happens if your income exceeds the median

If your six-month average income is above your state's median for your household size, you do not automatically fail. Instead, the means test moves to a second calculation that subtracts allowed expenses from your income. The court uses specific expense allowances set by the Internal Revenue Service, not your actual spending. These allowances cover housing, utilities, food, transportation, insurance, and other necessities.

After subtracting these allowed expenses, the test calculates your disposable income — the money theoretically left over each month. If your disposable income is below a certain threshold (currently $8,175 over 60 months, though this amount adjusts), you still pass and can file Chapter 7. If it is above that threshold, the court may conclude you have enough income to repay some debts and may deny your Chapter 7 case or require you to convert to Chapter 13.

The allowed expenses are not based on what you actually spend. If you have a car payment of $600 per month but the IRS allowance for transportation is $400, the test uses $400. This can feel unfair, but it is the rule across all bankruptcy courts. Your actual expenses matter only if they exceed the allowance and you can document why — for example, a medical condition that requires higher food costs.

Documents you need to gather

To complete the means test, you and your bankruptcy attorney will need to file official forms with the court. Form 106Sum is the summary of your income and expenses. Form 106Supp is the detailed calculation. These forms require supporting documents that the trustee will review.

Gather your last two months of pay stubs showing gross income, your most recent tax return (federal and state), and bank statements from the past two months. If you are self-employed, bring profit-and-loss statements or business tax returns. If you receive Social Security, unemployment, or other benefits, bring the award letter or recent statement showing the monthly amount. The trustee will verify these numbers against what you reported on the forms.

You will also need to list your actual monthly expenses on the forms — rent or mortgage, utilities, food, transportation, insurance, childcare, and any other regular costs. The court will compare these to the IRS allowances and use whichever is lower (or higher, if you can justify it). Keeping receipts and bank statements for three months before you file makes this easier and more accurate.

Common reasons people fail the means test

The most common reason is recent income that pulls the six-month average above the median. If you got a raise, a bonus, or a new job in the months before filing, that income counts even if it is temporary. Some people file Chapter 13 instead and wait a few months for the old income to drop out of the calculation, then convert to Chapter 7 later.

Another reason is that allowed expenses are lower than actual spending. If you have a mortgage of $2,000 per month but the IRS housing allowance for your area is $1,500, the test uses $1,500. The gap between allowance and reality can push disposable income above the threshold. In these cases, your attorney may argue that your actual expenses are necessary and should be deducted, but this requires documentation and court approval.

A third reason is that the calculation is done at the time you file. If your income drops after filing, you cannot go back and recalculate. This is why timing matters — if you know a bonus or temporary income is coming, you might file before it arrives.

What passing or failing actually means

Passing the means test means the court will not block you from filing Chapter 7 based on income. It does not mean your debts will be erased — that depends on other factors, like whether you have assets the trustee can sell or whether creditors object. It also does not mean Chapter 7 is the right choice for you. Some people pass the means test but choose Chapter 13 because they want to keep a house they are behind on, or because they have debts that Chapter 7 does not erase.

Failing the means test does not mean you cannot get bankruptcy relief. It means Chapter 7 may not be available, but Chapter 13 usually is. In Chapter 13, you propose a repayment plan based on your actual disposable income, and the court confirms whether it is fair. Some people find Chapter 13 better anyway because it lets them catch up on a mortgage or car loan while erasing other debts.

The means test is one piece of the bankruptcy decision, not the whole picture. Your attorney will help you understand whether Chapter 7 or Chapter 13 makes sense for your situation, regardless of what the means test says.

How to prepare for the means test calculation

Start by gathering documents now, before you meet with a bankruptcy attorney. Collect pay stubs, tax returns, and bank statements. If you are self-employed, pull together profit-and-loss statements or business tax returns for the past two years. Write down your monthly expenses — actual amounts you pay, not estimates. This gives your attorney a clear picture of your finances and speeds up the process.

If you know your income is above the median for your state and household size, do not assume you will fail. The second stage of the test often allows people above the median to file Chapter 7. Your attorney can do a preliminary calculation to show you where you stand. Many attorneys offer a free initial consultation where they can walk through the means test with you and explain what to expect.

Be honest about your income and expenses. The trustee will verify your numbers against tax returns and bank statements. If there are discrepancies, it raises questions and can delay your case. If your situation is complicated — irregular income, recent job changes, unusual expenses — tell your attorney upfront so they can plan how to present it to the court.

Frequently Asked Questions

Does my spouse's income count on the means test if we file together?

Yes, if you file jointly, both incomes are included in the calculation. If you file alone, only your income counts. Some married couples file separately to keep one spouse's income off the means test, though this is rare and has other consequences. Your attorney can explain whether this makes sense in your situation.

What if I lost my job after I filed but before the means test was calculated?

The means test uses your income from the six months before filing, not your income at the time of the hearing. If you lost your job after filing, you can update the court, but it will not change the means test calculation. However, it may affect your Chapter 13 repayment plan if you fail the means test and convert to Chapter 13.

Can I reduce my income to pass the means test?

Not legally. The test looks at income you actually received in the past six months. You cannot quit your job or reduce hours right before filing to manipulate the calculation. If the court suspects you did this intentionally, it can dismiss your case.

What if the IRS expense allowance is way lower than what I actually spend?

You can ask the court to allow your actual expenses if they exceed the IRS allowance and you can document why. This requires proof — receipts, invoices, or medical documentation. The court has discretion but does not grant these requests often. Your attorney can advise whether your situation warrants asking.

If I pass the means test, am I may provide to get Chapter 7?

Passing the means test means the court will not block you based on income, but other objections are still possible. A creditor can object to your discharge, or the trustee can object if you have assets to liquidate. Passing the means test is a necessary step, not a may provide of approval.