Means Test: The Bankruptcy Income Test

Why it matters

The test is the main gatekeeper between Chapter 7 and Chapter 13. Filers whose income falls at or below the state median generally pass without any further math. Filers above the median move to a second stage. That stage subtracts allowed expenses to see whether enough income is left over to repay creditors. If there's enough left over, a Chapter 7 filing may be presumed abusive, and Chapter 13's repayment plan becomes the more likely route. The details are famously technical. What counts as income, which expenses are allowed, and several exceptions can all shift the result, and the median figures themselves are updated periodically by the U.S. Trustee Program. A do-it-yourself calculation isn't something to rely on as a final answer.

Example

Alex supports a household of three and earns less than his state's median for that household size. He generally passes the means test, and can file Chapter 7 if the rest of his case fits. His sister has higher income, so she has to complete the full expense calculation. After allowed deductions, she still shows meaningful money left over each month. Her attorney walks her through what a Chapter 13 plan would look like instead.