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The Means Test in Chapter 7 and Chapter 13 Bankruptcy: What is it?

Probably the most “mythical” part of bankruptcy, the means test was a creation of the new bankruptcy law update in 2005. Basically, it is a 6 month look back period of your income and allowable expenses. Luckily, there are many ways to approach the means test when you are considering filing for bankruptcy. It is crucial that your attorney be well versed in what is and is not allowed in the calculations. A simple error on this form could cost you hundreds (or thousands) of dollars.

Who Get to Skip the Means Test?

If a filer’s debts are mostly “non-consumer” debts then the bankruptcy means test is inapplicable and the debtor may file for bankruptcy under Chapter 7. Tax debt is actually considered non-consumer as are many student loans. In addition, if your business debt is more than your personal debt, you are not required to go through the means test.

The bankruptcy means test does not apply to disabled veterans that incurred debt while on active duty or while serving in homeland defense activities. This exclusion applies as long as the veteran’s disability rating is at least 30 percent and more than half of the debt was acquired during active military duty or during service for homeland defense.

The Means Test: Step 1

The first part the means test compares the debtor’s average monthly income for the six months before filing for bankruptcy with their state’s median family income. If a debtor’s income is less than or equal to the state median, they can file for Chapter 7. There is still a chance that, even if a debtor passes the median income test, a bankruptcy trustee may later determine that the debtor has enough income after paying allowable expenses to repay creditors in a Chapter 13 repayment plan.

The income calculation should include the following sources:

  • wages, salary, tips, bonuses, overtime, and commissions
  • gross income from a business, profession, or a farm
  • interest, dividends, and royalties
  • rental and real property income
  • regular child support or spousal support
  • unemployment compensation
  • pension and retirement income
  • workers’ compensation
  • annuity payments
  • state disability insurance

Income excluded from the calculation includes tax refunds, Social Security retirement benefits, VA Disability, Social Security Disability Insurance, Supplemental Security Income, and Temporary Assistance for Needy Families (TANF).

The Means Test: Step 2

If the debtor makes more than their state’s median income, it is necessary to complete the second part of the means test to determine eligibility. If after deducting all allowed expenses — actual and standardized expenses — the debtor’s disposable income is enough to pay some portion of unsecured debt in a Chapter 13 repayment plan, then the debtor does not qualify for Chapter 7.

File for Chapter 13 Bankruptcy If You Fail the Means Test

A debtor that fails the means test may file for Chapter 13 bankruptcy. Chapter 13 places a filer’s debt in a five-year repayment plan. The plan must include the repayment of mandatory debts, such as priority debts and secured debts, and a portion of debts owed to nonpriority, unsecured creditors.

If you have any questions about Chapter 13 bankruptcy or bankruptcy in general please feel free to go to or contact us at

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