Bankruptcy Means Test Calculator

How the Bankruptcy Means Test Works

The bankruptcy means test was introduced with the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act as a safeguard to direct higher-income households toward repayment plans before allowing a Chapter 7 liquidation. The test compares your historical income to state median data and, if necessary, analyzes your disposable income after allowable deductions. It is important to remember that the law does not evaluate a single payday or one-off bonus in isolation; instead, it takes a six-month snapshot of all income received. Our calculator mirrors that approach by asking for gross income in each of the past six months. The total is divided by six to produce your current monthly income, often abbreviated as CMI. We then annualize the figure to see whether it exceeds your state’s median income for a household of your size, because that comparison determines whether you must proceed to the second part of the test.

If your annualized CMI falls below the state median, the Bankruptcy Code presumes that you qualify for Chapter 7 relief unless other circumstances indicate abuse. High medical bills, income interruptions, and family support obligations can therefore create a safe harbor even when total debt is substantial. Conversely, if the annualized CMI exceeds the median, you must document allowable expenses in detail. The U.S. Trustee publishes national and local standards for food, clothing, housing, transportation, and out-of-pocket health care. These standards serve as a baseline even if your actual spending is higher. Our calculator asks for three categories—national standards, housing, and transportation—to illustrate how those allowances reduce disposable income. We also collect secured debt payments like mortgages or car loans and priority obligations such as child support because they are deducted before calculating the amount that might be available to repay unsecured creditors.

Disposable income is the heart of the means test. After subtracting allowed expenses from your current monthly income, the law multiplies the remainder by sixty to estimate how much could be paid toward debts over a five-year Chapter 13 plan. If the sixty-month disposable income is below $9,075 (a statutory figure that adjusts every three years), the debtor typically passes the test and may file Chapter 7. If it exceeds $15,150, the law presumes abuse and pushes the debtor toward Chapter 13 repayment. Results between those numbers require additional comparisons, including whether the amount equals at least twenty-five percent of unsecured debts. Our summary highlights the sixty-month disposable income, because it is the most intuitive touchpoint for consumers evaluating their options. The calculator also outputs a recommendation narrative that describes whether Chapter 7 appears viable or whether a Chapter 13 repayment strategy is more realistic.

Understanding the Inputs in Detail

Household size affects both the median income threshold and the standard expense deductions. When entering the number, count yourself, your spouse if not legally separated, and any dependents you could claim on your tax return. Temporary houseguests typically do not count unless you provide more than half of their support. For the income entries, include wages, overtime, bonuses, commissions, rental income, business revenue, pension payments, and regular contributions from family members. Social Security benefits are excluded from the means test calculation, but unemployment benefits are included. If income fluctuated significantly, use the actual gross pay for each month instead of an average; this mirrors how Form 122A-1 captures the data. For couples, include the spouse’s income unless you are filing separately and maintain separate households. When in doubt, consider consulting a bankruptcy attorney, because misreporting income is a common cause of case delays.

The state median income field can be populated by referencing the U.S. Trustee’s current tables. These values change two or three times per year, so double-check the date range. If you are close to the threshold, timing the filing date can make a difference. For example, if you expect a seasonal bonus that would raise your six-month average above the median, waiting until that month drops out of the window might restore Chapter 7 eligibility. Likewise, if your income has recently fallen because of a layoff, you may consider delaying a filing to ensure that the lower income months are included. Our calculator does not pull state-specific data automatically, but the input ensures that you can model scenarios quickly once you have the relevant number.

Standard expense allowances are not guesses—they follow precise tables that consider family size and location. The national standards cover food, clothing, personal care, and miscellaneous expenses. Local standards cover housing and utilities for your county as well as transportation costs for your region. Many households spend more than the allowed amount, but the means test usually limits deductions to the published figure. There are exceptions for special circumstances such as unusually high child care, ongoing medical treatment, or costs necessary for the health and welfare of family members. Those must be documented with receipts and detailed explanations. In addition, certain actual expenses like taxes, involuntary payroll deductions, life insurance, and education needed for employment may be deducted even if not listed in the national standards. We encourage users to itemize these in the secured debt and priority debt fields if applicable, because they demonstrate the true cash flow impact on the household.

From Disposable Income to Chapter Choice

When the disposable income calculation yields a positive number, the law presumes that some funds could be redirected to creditors through a Chapter 13 repayment plan. Chapter 13 involves proposing a structured budget for three to five years, making monthly payments to a trustee who then distributes funds to creditors. Secured debts like mortgages and auto loans may be brought current through the plan, and certain unsecured debts can be discharged at the end if payments are completed. Our calculator uses the monthly disposable income as a proxy for the Chapter 13 plan payment, but actual plans may include trustee fees, attorney fees, and adjustments for ongoing mortgage payments. If disposable income is negative, a Chapter 7 liquidation is usually more appropriate. Chapter 7 allows eligible debtors to wipe out unsecured debts quickly, though non-exempt assets may be sold to repay creditors. Each chapter has trade-offs; the calculator’s narrative aims to explain them without replacing legal advice.

You may notice that the recommendation shifts when unsecured debt is high relative to disposable income. The means test recognizes that forcing a debtor to repay only a small fraction of credit card or medical debt may not be efficient. If the sixty-month disposable income is less than twenty-five percent of the unsecured debt total, the law may still permit Chapter 7 even if the dollar amount is between the low and high thresholds. That is why our form asks for total unsecured debt. For example, if you owe $80,000 on credit cards and personal loans and the sixty-month disposable income is $12,000, the ratio is fifteen percent, which strengthens a Chapter 7 argument. If the unsecured debt were only $20,000, the same disposable income would represent sixty percent, pointing toward Chapter 13. Our calculation engine surfaces this nuance in the results narrative, giving you actionable talking points for a consultation.

Planning Strategies Around the Means Test

The means test is not purely mechanical; timing, documentation, and budgeting can influence the outcome. Some debtors accelerate necessary expenses—like vehicle repairs or dental work—before filing, ensuring that the six-month income window reflects the true cost of living. Others adjust withholding so that tax refunds are smaller, because large refunds can signal disposable income to the trustee. If you receive overtime, commissions, or gig income sporadically, consider the best filing month to present a representative average. Households with disabled or elderly dependents may qualify for additional deductions related to medical or caretaking costs. The explanation section of this calculator includes these planning tips to empower you with knowledge before you engage an attorney. Armed with the data, you can ask more targeted questions and avoid costly delays.

The output table summarizes key metrics that you can print or copy into an email for your legal advisor. The current monthly income line shows the averaged figure that corresponds to Line 11 on Form 122A-1. The annualized income line is a simple multiple of twelve that you can compare to the published medians. Disposable income reflects the step-by-step deductions applied in the Chapter 7 means test. The sixty-month figure provides a quick benchmark for the presumption of abuse thresholds. Finally, the recommendation clarifies whether Chapter 7 appears defensible, Chapter 13 is more likely, or if the case falls into a gray area requiring professional review. These outputs do not guarantee a court result but align your expectations with statutory formulas so that you enter consultations with confidence.

While this tool offers a comprehensive overview, it cannot replace the nuance of legal counsel. Bankruptcy courts can deviate from the means test results if there is evidence of bad faith or special circumstances. Additionally, certain debts are not dischargeable in Chapter 7, including most student loans, recent taxes, and domestic support obligations. Chapter 13 may offer better outcomes for those debts even when the means test indicates Chapter 7 eligibility. Use the calculator as an educational resource to structure your questions, gather documentation, and explore repayment budgets. By combining quantitative analysis with professional advice, you can select the chapter that aligns with your goals and preserves as much financial stability as possible during a challenging season.