What is the Bankruptcy Means Test?

The bankruptcy means test is an income calculation required by federal law that determines whether you qualify to file Chapter 7 bankruptcy. It was designed to prevent high-income individuals from using Chapter 7 when they have the ability to repay at least some of their debts through a Chapter 13 repayment plan.

The means test sounds intimidating, but the math is straightforward — and most people who need bankruptcy relief pass it.

Part 1: Compare Your Income to the State Median

The first step is to calculate your Current Monthly Income (CMI) — the average monthly income you received from all sources during the 6 full calendar months before your filing date. This includes wages, rental income, business income, pension payments, and most other regular income. It excludes Social Security benefits.

You then multiply your CMI by 12 to get your annualized income and compare it to your state's median income for a household of your size. The Census Bureau updates these state medians periodically.

If your annualized income is at or below the state median: You pass the means test automatically. You may proceed with a Chapter 7 filing.

If your annualized income is above the state median: You must proceed to Part 2.

Part 2: Calculating Disposable Income

Part 2 of the means test subtracts allowed expenses from your CMI to determine your monthly disposable income. Allowed expenses include:

• IRS National Standards: Food, clothing, personal care, housekeeping — set amounts based on household size, not your actual spending
• IRS Local Standards: Housing costs and transportation expenses based on your county
• Actual necessary expenses: Health insurance, childcare, court-ordered payments, certain taxes
• Secured and priority debt payments: Mortgage, car loan, back taxes

After subtracting these expenses, if your disposable income is below a threshold defined by law, you pass and may file Chapter 7. If your disposable income is above the threshold, there is a "presumption of abuse" — meaning you may be required to file Chapter 13 instead.

Special Situations

• Primarily business debts: If most of your debt is from business operations, the means test does not apply to you.
• Disabled veterans: Veterans who incurred most of their debt on active duty may be exempt from the means test.
• Social Security income: Social Security benefits are excluded from the CMI calculation, which is significant for retirees and disability recipients.

What If You Don't Pass?

Failing the means test does not mean you can't file for bankruptcy. It means Chapter 7 may not be available to you, but Chapter 13 remains an option. Chapter 13 has no income cap — instead, it requires sufficient income to fund a repayment plan.

Easy-Case and the Means Test

Easy-Case walks you through both parts of the means test as part of the interview process. You enter your income and household information, and Easy-Case calculates your CMI, compares it to your state median, and applies the IRS expense standards for your county. You'll see your result before you pay anything.

Learn who qualifies for Chapter 7 or compare Chapter 7 and Chapter 13 to understand your options.