The means test is one of the most heavily tested and most practically important concepts in consumer bankruptcy. Created by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 and codified at 11 U.S.C. section 707(b), it is designed to steer higher-income debtors with real repayment capacity toward Chapter 13 instead of a Chapter 7 liquidation. Paralegals in consumer bankruptcy practices often prepare the means test forms, so understanding each step is essential both for the certification exam and for day-to-day work.

What Is the Means Test and Who Must Take It?

The means test is a formula that measures whether a debtor's income and expenses create a presumption that a Chapter 7 filing is an abuse of the bankruptcy system. It applies only when the debtor's debts are primarily consumer debts. If the majority of debt, measured by dollar amount, arises from a business or investment purpose, the means test does not apply. Certain debtors are also exempt, including disabled veterans whose debt was incurred during active duty or homeland defense activity, and some reservists who served on active duty for a qualifying period.

Which Forms Are Used?

Three official forms carry the calculation. Form 122A-1 computes current monthly income and compares it to the state median. Form 122A-1Supp is a statement of exemption from the presumption of abuse. Form 122A-2 is the full means test calculation, completed only if the debtor's income is above the median. Knowing which form does what is a common exam question.

Step One: Calculate Current Monthly Income

The starting number is current monthly income (CMI). CMI is the average monthly income received from all sources during the six full calendar months before the month in which the case is filed. If a debtor files on September 15, the look-back period runs from March 1 through August 31. This is a historical average, not a projection of what the debtor currently earns.

Included: wages, salary, business income net of ordinary operating expenses, rents net of expenses, interest, dividends, pensions, unemployment compensation, and regular contributions from others to household expenses.
Excluded: Social Security benefits and payments to victims of war crimes or crimes against humanity, along with certain payments on account of terrorism.

Because the six-month window is fixed by statute, timing matters. A debtor who recently lost a high-paying job may still show a high CMI. This is why attorneys and paralegals carefully review the filing date and collect six months of pay stubs, bank statements, and business records.

Step Two: Compare to the State Median Income

The CMI is multiplied by twelve to get an annualized figure. That figure is compared to the median family income for the debtor's state and household size, published by the U.S. Trustee Program and updated regularly. For households larger than four, a statutory add-on is applied for each additional person.

Below median: there is no presumption of abuse and the debtor does not complete Form 122A-2. The test ends here.
Above median: the debtor must continue to the expense calculation.

Step Three: Deduct Allowed Expenses

For above-median debtors, Form 122A-2 subtracts specific allowable expenses from CMI. These are not the debtor's actual spending; many are fixed standards drawn from IRS Collection Financial Standards.

Standard Deductions

National Standards: food, clothing, housekeeping supplies, personal care, and miscellany.
Local Standards: housing and utilities, and transportation ownership and operating costs, which vary by region and household size.
Out-of-pocket health care expenses under a set standard.

Other Necessary Expenses

The form also allows actual amounts for items such as taxes, mandatory payroll deductions, term life insurance, court-ordered support, education required for employment or for a disabled child, childcare, health insurance, disability insurance, and continued care for an ill or disabled household member. Charitable contributions are allowed up to 15 percent of gross income in certain circumstances.

Debt Payment Deductions

Debtors may deduct the average monthly payments on secured debts that are contractually due during the 60 months after filing, such as a mortgage or car loan. They may also deduct payments needed to cure arrears on priority claims, such as past-due child support or certain taxes, divided over 60 months. Chapter 13 administrative expenses are also considered in part.

Step Four: Determine Monthly Disposable Income

After all allowed deductions, the remainder is monthly disposable income. This number is multiplied by 60 to approximate five years of repayment capacity. The result is compared to two thresholds, which Congress adjusts for inflation every three years, so always check the current figures:

Below the lower threshold (roughly $9,000 in recent adjustments): the presumption of abuse does not arise.
Above the higher threshold (roughly $15,000): abuse is presumed.
Between the two: the presumption arises only if the 60-month figure is at least 25 percent of the debtor's nonpriority unsecured claims.

Rebutting the Presumption

A debtor may rebut a presumption of abuse by showing special circumstances, such as a serious medical condition or a call to active military duty, that justify additional expenses or income adjustments. The debtor must document each item and provide a detailed explanation, and the adjustments must make the presumption inapplicable. Even without a presumption, a court may dismiss a case under the totality of the circumstances test or for bad faith.

Frequently Asked Questions

Does the means test apply to Chapter 13?

It does not decide eligibility for Chapter 13, but the same CMI and median comparison determine the applicable commitment period (three or five years) and the disposable income a Chapter 13 debtor must commit to the plan, using Forms 122C-1 and 122C-2.

What if the debtor has mostly business debts?

If debts are not primarily consumer debts, the means test does not apply, though a court can still dismiss for other forms of abuse.

Who can file a motion to dismiss for abuse?

The U.S. Trustee, a bankruptcy administrator, the case trustee, or any party in interest may raise the issue, although a party other than the trustee generally cannot bring a motion based on the presumption itself.

Study Tips for the Exam

Focus on the sequence: consumer debt, CMI, median comparison, expenses, disposable income, thresholds, rebuttal. Memorize the six-month look-back rule and the 60-month multiplier. Practice with sample fact patterns until the order feels automatic. You can drill these definitions with our paralegal exam flashcards, which cover bankruptcy terms and procedure in spaced-repetition format.

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Means Test Calculations for Chapter 7 Bankruptcy: A Step-by-Step Paralegal Guide