Chapter 7 Means Test
The Chapter 7 means test is the income and expense analysis that determines whether you can discharge your debts through Chapter 7 liquidation bankruptcy or must instead enter a Chapter 13 repayment plan. Congress added the means test in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) to prevent higher-income filers from using Chapter 7. The test works in two steps: first, if your average monthly income over the last 6 months annualized falls below your state's median household income, you pass automatically and can file Chapter 7. If you're above the median, a second calculation subtracts allowable expenses — using IRS standards, not your actual spending — to see if you have enough disposable income to fund a Chapter 13 plan. Most filers below the state median clear the test easily; it's above-median filers with significant disposable income who face the real gatekeeping function the test was designed for.
Current Law (2026)
The means test determines whether a debtor qualifies for Chapter 7 bankruptcy (liquidation/discharge) or must file under Chapter 13 (repayment plan). It compares the debtor's income to the state median income and evaluates ability to repay. Filing also triggers the automatic stay, which halts most collection activity.
| Parameter | Value |
|---|---|
| Income comparison | Debtor's last 6 months annualized vs. state median |
| Below median | Presumption of eligibility for Chapter 7 |
| Above median | Must pass expense deduction analysis |
| Form | Official Form 122A (Chapter 7 Means Test Calculation) |
Legal Authority
- 11 U.S.C. § 707(b) — Dismissal or conversion of consumer debt cases for abuse
- 11 U.S.C. § 707(b)(2)(A)(i) — Presumption of abuse formula: current monthly income minus allowed expenses × 60 months; for cases filed April 1, 2025 through March 31, 2028, abuse is presumed if the result is at least $17,150, or if it is at least $10,275 and sufficient to pay 25% or more of nonpriority unsecured debt
- 11 U.S.C. § 707(b)(2)(A)(ii)-(iv) — Allowed expense deductions: IRS National Standards (food, clothing, personal care), IRS Local Standards (housing, transportation), actual secured debt payments, priority claim payments, and charitable contributions up to 15% of gross income
- 11 U.S.C. § 707(b)(2)(B) — Special circumstances rebuttal (serious medical condition, active military duty, etc.)
- 11 U.S.C. § 707(b)(3) — Totality of circumstances test when presumption of abuse does not arise
- 11 U.S.C. § 101(10A) — Definition of "current monthly income" (CMI): average monthly income from all sources over the 6 calendar months before filing, excluding Social Security benefits, payments to victims of war crimes/terrorism, and certain military combat pay
- 11 U.S.C. § 109(b) — Who may be a Chapter 7 debtor (excludes railroads, insured banks, insurance companies)
- 11 U.S.C. § 109(h) — Pre-filing credit counseling requirement (approved nonprofit agency briefing within 180 days before filing)
- 11 U.S.C. § 727 — Discharge (court shall grant Chapter 7 discharge unless debtor committed fraud, concealed property, destroyed records, failed to explain loss of assets, or received a discharge within 8 years; debtor may waive discharge; objections may be filed by trustee, creditor, or U.S. trustee)
- BAPCPA (2005) — Bankruptcy Abuse Prevention and Consumer Protection Act (enacted the means test)
How It Works
The means test runs in two steps. First, calculate your current monthly income (CMI) — defined under 11 U.S.C. § 101(10A) as your average monthly income from all sources over the 6 calendar months before filing, excluding Social Security benefits and certain military combat pay. Annualize that figure and compare it to your state's median income for your household size (published by the Census Bureau and updated annually at justice.gov/ust). If you're below your state's median, you pass the means test automatically — no further analysis needed, and Chapter 7 is available to you.
If your annualized CMI exceeds the state median, you must complete the full means test on Form 122A-2, which subtracts allowable expenses from your CMI to calculate monthly disposable income. The allowable expenses are not your actual spending — they are IRS National Standards for food, clothing, and personal care; IRS Local Standards for housing and transportation costs in your area; plus actual secured debt payments (mortgage, car), health insurance premiums, and certain other expenses. Under 11 U.S.C. § 707(b)(2)(A) (effective April 1, 2025 through March 31, 2028), if the resulting monthly disposable income multiplied by 60 months falls below $10,275, you pass. If it exceeds $17,150, abuse is presumed and Chapter 7 will likely be denied. Between those thresholds, abuse is presumed if your disposable income could repay 25% or more of your non-priority unsecured debts.
Two safety valves exist for filers who might otherwise fail. The special circumstances provision at § 707(b)(2)(B) lets you rebut the presumption of abuse by documenting extraordinary expenses the IRS standards don't capture — serious medical conditions and active military duty in a combat zone are explicitly named in the statute. You must itemize each special circumstance, provide documentation, and explain why no reasonable alternative exists. Separately, under § 707(b)(3), courts retain discretion to dismiss a filing for bad faith or abuse even when the formula says you pass — and to allow a filing even when the formula says you fail, if the totality of your financial circumstances warrants it. Before any of this, § 109(h) requires you to complete a briefing with an approved nonprofit credit counseling agency within the 180 days before filing.
How It Affects You
If your income is below your state's median: You automatically pass the means test — Chapter 7 is available to you without further calculation, and you can discharge most unsecured debt (credit cards, personal loans, medical bills) while keeping property protected by your state's bankruptcy exemptions. Median income thresholds vary significantly by state and household size — a family of four in Mississippi has a much lower median than the same family in California ($60,000 vs. $107,000+ range). The U.S. Trustee Program — administered through the bankruptcy courts system — publishes current state median income figures at justice.gov/ust. Even below-median filers can have their cases dismissed for "abuse" if the totality of circumstances suggests bad faith, but this is rare for straightforward consumer debt relief situations.
If your income is above your state's median: You must complete the full means test calculation on Form 122A-2, which compares your current monthly income against IRS-standardized allowable expenses (housing, transportation, food, healthcare) plus actual expenses for certain items (mortgage/rent, car payments, health insurance, taxes). If the result — your "monthly disposable income" — is below approximately $171.25/month ($10,275 over 60 months) you can still file Chapter 7. If it's above approximately $285.83/month ($17,150 over 60 months) you're presumptively ineligible and Chapter 13 is the likely alternative (figures effective April 1, 2025–March 31, 2028). Between those thresholds, there's a 5-year total debt test. Important: the IRS expense standards for housing and transportation are based on national and local averages — if your actual costs significantly exceed them (high-cost city rent, expensive commute), work with a bankruptcy attorney to identify every allowable expense deduction. Above-median filers who fail the means test and turn to Chapter 13 face 3–5 year repayment plans but can still discharge remaining unsecured debt at the end.
If you recently lost a job, had reduced hours, or experienced a significant income drop: The means test's 6-month lookback window creates a timing opportunity. Because the test uses your average income over the 6 calendar months before filing (not current income), high-income months from before your job loss will inflate your calculated "current monthly income." Waiting until those high-income months cycle out of the 6-month window can be the difference between passing and failing — but don't wait passively if creditors are moving toward wage garnishment, bank levies, or foreclosure. A bankruptcy attorney can calculate exactly when your rolling average will drop below the median. Debtors who fail the means test and cannot file Chapter 7 remain subject to fair debt collection rules while pursuing Chapter 13 or other alternatives.
If you're a bankruptcy attorney or debtor counselor helping clients navigate the means test: The most common optimization opportunities are on the expense side of Form 122A-2. Clients often under-document allowable actual expenses: health insurance premiums (fully allowable), childcare for employment-related expenses, court-ordered payments, contributions to employee benefit plans, and secured debt payments (mortgage and car) all reduce disposable income. For above-median clients whose disposable income is close to the $142/$237 thresholds: a careful line-by-line review of IRS Local Standards (which may set allowances below actual costs for housing in high-cost areas) and National Standards is essential. The "special circumstances" provision (11 U.S.C. § 707(b)(2)(B)) allows deviation from standard expense allowances if you can document an extraordinary expense that affects your ability to pay — medical conditions, unusual dependent care, and disability-related costs are the most common successful applications.
State Variations
The means test is federal, but state median income figures vary significantly (updated annually by the Census Bureau). Higher-median states have higher thresholds:
- NJ, MD, CT, MA: Among the highest median incomes (~$90,000+ for single, $130,000+ for family of 4)
- MS, WV, AR, NM: Among the lowest (~$40,000-45,000 for single)
- Exemptions: While the means test is federal, bankruptcy exemptions (what property you keep) are largely determined by state law. Some states are very generous (TX homestead exemption is unlimited; FL similar), others are restrictive.
Implementing Regulations
- 11 CFR Part 8 — FEC Collection of Administrative Debts: the Federal Election Commission's implementation of the Debt Collection Improvement Act of 1996 (31 U.S.C. §§ 3701, 3711, 3716–3720A) for collecting debts owed to the FEC by employees, contractors, and vendors. Key provisions:
- § 8.2 — Scope: applies to debts owed by current and former FEC employees and debts arising from goods or services provided by contractors or vendors; expressly excludes: FEC compliance enforcement debts (covered under 11 CFR Part 111, including civil penalties and campaign finance court judgments), criminal fraud claims, antitrust debts, IRS debts, inter-agency debts, and debts already subject to salary offset under 5 U.S.C. § 5514
- § 8.3 — Collection sequence: FEC must pursue all appropriate collection actions; any debt delinquent for more than 180 days must be referred to Treasury for cross-servicing collection; debts delinquent 180 days or less may also be referred at the FEC's discretion; Treasury collection may include administrative offset (including Treasury Offset Program), wage garnishment, and credit bureau reporting; debts exceeding $100,000 (exclusive of interest and charges) must be referred to DOJ for litigation
- § 8.4 — Bankruptcy: when FEC learns of a debtor's bankruptcy filing, FEC follows 31 CFR 901.2(h) before taking further collection action — which requires reviewing the automatic stay and filing a proof of claim in the bankruptcy proceeding
- § 8.5 — Interest and penalties: FEC assesses interest and penalties under 31 U.S.C. § 3717; interest is waived if the debt is paid in full within 30 days after interest begins to accrue; FEC may waive interest, penalties, and administrative costs if collection would be against equity and good conscience or if the compromise criteria in 31 CFR 902.2(a) apply
Pending Legislation (119th Congress)
- S 3424 — Bankruptcy Administration Improvement Act of 2025. Raises Chapter 7 trustee pay to $120 per case and reallocates fee revenue. Status: Became law.
- S 3977 — Bankruptcy Threshold Adjustment Act of 2026. Adjusts who can use Chapter 11 and Chapter 13 by raising the small-business cap to $7.5M and capping consumer filings at $2.75M. Status: Introduced.
- HR 7730 — Bankruptcy Threshold Adjustment Act of 2026. Raises small-business Chapter 11 debt cap to $7.5M and sets Chapter 13 consumer limit at $2.75M. Status: In committee.
- HR 8111 — Would modify venue requirements relating to bankruptcy proceedings. Status: Introduced.
Recent Developments
- Bankruptcy Administration Improvement Act signed (2025): S 3424 became law, raising Chapter 7 trustee compensation to $120 per case and reallocating filing fee revenue. This is an operational improvement that doesn't change the means test itself but strengthens the trustee system that administers it. See Bankruptcy Exemptions.
- Bankruptcy threshold adjustments proposed: The Bankruptcy Threshold Adjustment Act (S 3977 / HR 7730) would raise the Chapter 13 consumer debt limit to $2.75 million. For above-median filers who fail the means test and are pushed to Chapter 13, this expanded limit could accommodate more debtors. It would also raise the small-business Chapter 11 Subchapter V cap to $7.5 million.
- Medical debt continues driving filings: Medical debt remains one of the leading causes of personal bankruptcy filings, and medical debt is fully dischargeable in Chapter 7. The intersection of evolving medical debt protections (credit reporting changes, No Surprises Act) and bankruptcy is an active policy area — stronger protections upstream may reduce the need for bankruptcy as a medical debt remedy.
- Means test median income thresholds updated: The Census Bureau updates state median income figures used in the means test annually. For 2025-2026, median incomes have risen modestly with inflation, effectively raising the income threshold below which debtors automatically qualify for Chapter 7. Debtors in higher-median states (NJ, MD, CT) can have significantly higher incomes and still pass the means test than those in lower-median states (MS, WV).