The means test is one of the most important, and most misunderstood, parts of a Chapter 7 petition. If you prepare or review petitions, understanding what it does makes your work more accurate. This is an overview for people who work with the paperwork. Whether and how a debtor qualifies is a legal question for the attorney.
What it is for
For debtors whose debts are primarily consumer debts, the means test is a screen. It asks whether the debtor has enough income to repay some of what they owe, in which case a Chapter 7 filing can be presumed to be an abuse. If the presumption arises, the debtor may need to consider another path, such as Chapter 13. The attorney decides what to do with the result.
Step one: current monthly income
The starting point is the debtor's current monthly income (CMI). It is not what they earned last month. It is the average monthly income from all sources during the six full calendar months before the month of filing. A few points that cause errors:
- The period is a fixed lookback, so the filing date drives which months count.
- "All sources" is broad. It includes wages, business and rental income, pensions, unemployment and regular contributions from others toward household expenses. Social Security benefits are specifically excluded.
- For a married couple filing jointly, both spouses' income is included, and there are separate rules when only one spouse files.
Step two: compare it to the state median
The annualized CMI is compared with the median family income for the debtor's state and household size. Those figures are published by the U.S. Trustee Program and updated periodically, so always use the current table. If the debtor is below the median, the test is generally passed at this step. If the debtor is above it, there is a second part.
Step three: the deductions
For an above-median debtor, the form allows certain expenses and payments to be deducted from income, including standard allowances, actual costs in some categories, and payments on secured and priority debts. What is left is the monthly disposable income, which determines whether a presumption of abuse arises. This is the part where the arithmetic is most detailed, and where mistakes and unsupported figures create the most rework.
The forms
For Chapter 7 the work is done on the Official Form 122A series (the statement of current monthly income and, where required, the means test calculation). Chapter 13 has a parallel set, the 122C series, which also determines how long the plan runs. Forms are revised from time to time, so check that you have the current versions, and any local variations.
Where mistakes happen
- Using the wrong six months, or averaging the wrong way.
- Leaving out a source of income, or counting something that should be excluded.
- Using last year's median figures.
- Having the means test, Schedule I and the tax return disagree, with no explanation.
- Claiming deductions with no documentation.
The fixes are habits: build income month by month from documents, reconcile across forms and keep the source for each figure. We cover more of these in common petition errors.
Learn it properly
The means test is a core topic in Chapter 7 training and in the NAVBA Chapter 7 certification exam. If you want to build a career on this work, see how to join NAVBA. If you are an attorney who would rather hand this off, see how to hire a Virtual Bankruptcy Assistant.
This article is general information about bankruptcy practice, not legal advice. Local rules, trustee preferences and state law vary, so confirm current requirements for your jurisdiction.
