One of the most common things we hear from potential clients is:
“I looked online and I think I qualify for Chapter 7.”
Or just as often:
“I make too much money, so I can’t file Chapter 7.”
Both of those statements are often wrong.
The reason? The Means Test is far more complicated than most people realize — and it’s only the beginning of the analysis.
Let’s break this down in plain English.
What Is the Means Test?
The Means Test is a form required in most Chapter 7 bankruptcy cases. It’s designed to determine whether someone’s income is low enough — after allowed expenses — to qualify for Chapter 7 instead of being pushed into Chapter 13.
It was created to answer one question:
Does this person have enough disposable income to repay some of their debts?
If the answer is “yes,” the court may say you must file Chapter 13 instead of Chapter 7.
But the way that question is answered is where things get complicated.
Where Do the Numbers Come From?
Many people assume the Means Test is based on their current monthly bills.
It is not.
The Means Test uses a mix of:
1. Your Average Income (Last 6 Months)
The first part of the form calculates your Current Monthly Income (CMI) — which is actually an average of the last six full calendar months before filing.
Important points:
- It includes wages, bonuses, commissions
- It includes side income
- It can include regular contributions from others
- It does not mean what you made this month
If you recently lost income, that may not immediately show up on the Means Test.
2. Median Income Comparison
Your six-month average is then compared to the median income for a household your size in your state.
If you are below the median, you usually qualify for Chapter 7 without going through the full expense calculation.
If you are above the median, you must complete the full Means Test calculation.
This is where many people panic.
3. Allowed Expenses (Not Your Actual Expenses)
Here’s the part most people misunderstand:
The Means Test does not simply subtract your real-life bills.
It uses IRS standard expense allowances for many categories.
For example:
- Food
- Clothing
- Transportation
- Housing (sometimes capped)
- Utilities
Some expenses are fixed by IRS tables — even if your real expenses are higher.
Some actual expenses are allowed, such as:
- Secured debt payments (car loans, mortgages)
- Health insurance
- Childcare
- Certain taxes
The form subtracts allowed expenses from your income to calculate “disposable income.”
If that disposable income exceeds certain thresholds, a “presumption of abuse” may arise.
Why You May Not “Make It” Into Chapter 7
Even if you feel broke every month, the Means Test might say you have disposable income.
Why?
Because:
- The IRS housing standard might be lower than your real rent or mortgage.
- Your grocery costs may exceed the standard allowance.
- The six-month average may include overtime you’re no longer receiving.
- The formula doesn’t fully reflect real-life cash flow.
This is why online calculators are often misleading.
But here’s something very important:
Failing the Means Test does not automatically end the analysis.
It Doesn’t Stop at the Means Test
Even if the form shows a presumption of abuse, that is not necessarily the final word.
There are additional considerations:
1. Special Circumstances
The law allows adjustments for:
- Job loss
- Medical conditions
- Temporary spikes in income
- Required expenses not captured in the standard form
2. Totality of the Circumstances
In some cases, even if there’s no formal “presumption,” a trustee can argue abuse based on overall financial reality.
Likewise, sometimes a case can still proceed if the numbers technically trigger a presumption but the real situation justifies Chapter 7.
This is why legal analysis matters.
What Is “Abuse”?
The Bankruptcy Code says that a case may be dismissed if granting Chapter 7 relief would be an “abuse” of the system.
What does that mean?
It means Congress decided that if someone has enough income to meaningfully repay creditors, they should not be allowed to wipe out their debts entirely under Chapter 7.
Instead, they should file Chapter 13 and repay a portion over time.
Abuse generally refers to:
- Having sufficient disposable income to repay creditors
- Manipulating income or expenses to qualify
- Filing in bad faith
Most people we see are not trying to abuse the system. They are trying to survive.
But the law was written to screen for perceived misuse.
Where Did This Concept Come From?
The Means Test was created as part of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA).
Before 2005:
- Judges had more discretion.
- Trustees could challenge cases, but there was no rigid formula.
Credit card companies and lenders lobbied heavily for reform, arguing that too many people who could repay debts were filing Chapter 7.
Congress responded by creating:
- Mandatory credit counseling
- The Means Test formula
- Expanded documentation requirements
The idea was to push higher-income debtors into repayment plans.
In reality, the law added complexity — and confusion — for everyday families.
Why It’s Considered “Abuse”
The theory behind the Means Test is this:
Bankruptcy is meant to give an honest but unfortunate debtor a fresh start.
It is not meant to be a financial strategy for someone who could afford to repay creditors.
So if someone has significant disposable income and still seeks to wipe out debts entirely, Congress labeled that as potential “abuse.”
Whether you agree with that policy or not, it is now part of the law.
The Biggest Misconception
The most dangerous assumption is:
“I ran the numbers online and I don’t qualify.”
Or:
“I make too much money.”
We regularly see clients who:
- Thought they didn’t qualify — but did.
- Thought they qualified — but didn’t.
- Qualified only after properly calculating deductions.
- Had recent income changes that changed everything.
The Means Test is technical. Small errors can dramatically change the outcome.
Chapter 7 vs. Chapter 13 Is Not About Failure
If someone doesn’t qualify for Chapter 7, that does not mean:
- They did something wrong.
- They are being punished.
- Bankruptcy is off the table.
It simply means the law requires a repayment structure instead of immediate discharge.
For many clients, Chapter 13:
- Stops foreclosure
- Stops repossession
- Allows mortgage catch-up
- Protects assets
- Provides structure and certainty
The right chapter depends on the full financial picture — not just one form.
The Bottom Line
The Means Test is:
- A formula created in 2005
- Based on six-month income averages
- Using IRS standard expenses
- Designed to screen for perceived abuse
- Only one part of the Chapter 7 analysis
It is not:
- A moral judgment
- A reflection of your financial struggle
- The final word in every case
If you’re overwhelmed by debt, the question isn’t just “Do I pass the Means Test?”
The real question is:
What is the best legal solution for my specific situation?
Every case requires a detailed review of income, expenses, assets, goals, and timing.
And that analysis can’t be done with an online calculator.
If you’re unsure where you stand, we can review your numbers carefully and explain your options clearly — so you understand not just the result, but the reasoning behind it.
Because informed clients make confident decisions.
