Bankruptcy basics

The Bankruptcy Means Test (Bankruptcy Basics)

May 1, 2014

The bankruptcy means test is an aspect of U.S. consumer bankruptcy law that was introduced as part of the 2005 bankruptcy reform law. All people who file a Chapter 13 bankruptcy case or a Chapter 7 bankruptcy case (and who primarily have consumer debts) must file a completed means test as part of their petition.

The Chapter 7 and Chapter 13 bankruptcy means tests are similar, but perform different functions.

The Chapter 7 Bankruptcy Means Test

The Chapter 7 means test basically asks the question: “Did you make so much money in the past six months that you don’t qualify to file a Chapter 7 case?”

To answer that question, you add up all your income from the last six complete months before filing, and then divide by six. If that number is below the median income in your state for a household of your size, the inquiry ends. You qualify to file Chapter 7. If that number is above median, you have to go through a complicated calculation: First you subtract what the government thinks people nationwide spend on necessities.  Then you subtract what people in your county spend on other necessities. Finally, you subtract amounts you personally spend on necessities that are specific to you (such as taxes, health insurance, car payments, etc).

If the ultimate result is that you have more than a certain amount per month in disposable income, then you don’t qualify to file Chapter 7. (That amount, as of May 1, 2014, is $208, but it changes frequently.)

The Chapter 13 Bankruptcy Means Test

The Chapter 13 means test asks two questions: “Do you qualify for a 36-month plan?” and “What’s the minimum amount your unsecured creditors must be repaid?”

To answer those questions, you add up your last six months’ income and divide by six (just like with the Chapter 7 means test). If that number is below median, you qualify for a 36-month/3-year plan. (Nevertheless, people who qualify for 36-month plans still often choose 60-month plans because it benefits them.)

If you are above-median, you go through calculations similar to those described above. If the ultimate result is a number higher than zero, then that’s the minimum amount per month that your unsecured creditors need to get paid.

Bankruptcy Means Test Provisions in the Code

For those interested, the Chapter 7 bankruptcy means test is codified in Section 707(b) of the Bankruptcy Code. Section 707(b) lays out the guideline for conducting the means test and says that if you don’t pass it, a “presumption of abuse” arises, and gives the Court the authority to dismiss the case.

The Chapter 13 bankruptcy means test is codified in Section 1325(b) of the Bankruptcy Code. Section 1325(b) states that the Court cannot confirm an objected-to plan unless the debtor commits all of his or her disposable income during the lifetime of the plan to repaying the unsecured creditors. To determine what constitutes “disposable income,” it then directs you back to the calculation laid out in Section 707(b).


Properly conducting the bankruptcy means test is one of the most complicated parts of filing a bankruptcy case. It takes expertise to know what expenses you are legally entitled to include in order to improve your result. Moreover, the result often determines the success or failure of your case.  If you’re unsure of how the means test will impact your case, be sure to contact an attorney who is experienced in bankruptcy.