Not everyone can file Chapter 7 bankruptcy. Congress created the means test in 2005 to ensure that Chapter 7 — the form of bankruptcy that eliminates debts without a repayment plan — is reserved for people who genuinely cannot afford to repay their creditors. The means test can seem complicated, but the underlying concept is straightforward: it compares your income and expenses to a formula to determine whether you have enough disposable income to fund a Chapter 13 repayment plan instead.
The Two-Part Means Test
The means test has two parts. Many people pass after the first part without needing to complete the second.
Part 1: Income Comparison
The first step is to calculate your average monthly income for the six months preceding your bankruptcy filing (this is called "Current Monthly Income" or CMI under the Bankruptcy Code). This includes all sources of income: wages, self-employment income, rental income, regular contributions from others, and more. Social Security income is excluded from this calculation.
You then annualize that number (multiply by 12) and compare it to Ohio's median annual income for a household of your size. The U.S. Trustee's Office updates these figures regularly.
If your income is below Ohio's median for your household size, you automatically pass the means test and qualify for Chapter 7. No further calculation is needed.
Part 2: Disposable Income Calculation
If your income is above Ohio's median, you must complete the second part of the means test. This involves subtracting allowed expenses from your current monthly income to determine your "monthly disposable income." Expenses are calculated using a combination of:
- IRS national and local standards for housing, transportation, and food — these are fixed amounts set by the IRS regardless of what you actually spend
- Actual expenses for certain categories like secured debt payments, health insurance, care for elderly family members, and education costs
If the result shows that you have sufficient disposable income to fund a meaningful Chapter 13 repayment plan, you are presumed to be abusing the Chapter 7 process. The court can dismiss your case or convert it to Chapter 13 — unless you can show special circumstances that justify Chapter 7 despite passing the income threshold.
What Income Counts?
The means test income calculation is based on your past 6 months of income — not your current or future income. This can work in your favor or against you:
- If you recently lost your job, your income over the past 6 months may still be relatively high even though your current income is much lower. Depending on the timing, it may be worth waiting a few months before filing for your income average to drop.
- If you recently got a raise or started a new job, the 6-month average may be lower than your current income — which could work in your favor.
Strategic timing of a bankruptcy filing is one of the reasons working with an attorney matters.
What Expenses Are Allowed?
The IRS standards used in the means test can differ significantly from your actual expenses. For example:
- The IRS food and household expense standard for your family size applies, regardless of what you actually spend
- Housing and vehicle expense standards vary by county and are set by the IRS
- Actual amounts are used for mortgage or rent payments, car payments, health insurance premiums, and certain other specific categories
People who live in areas with high housing costs or who have significant secured debt payments (mortgage, car loans) often find that the allowed expenses under the means test are close to or exceed their income, helping them pass even if their gross income is above the median.
What If You Don't Pass the Means Test?
Failing the means test does not mean you have no options — it means Chapter 7 may not be available to you. Other bankruptcy options include:
- Chapter 13: A reorganization plan that allows you to repay some or all of your debts over 3 to 5 years, while keeping your property. Chapter 13 has no means test income ceiling.
- Waiting and refiling: If your income has temporarily spiked (a bonus, overtime, etc.), waiting until your 6-month average drops below the median may allow you to pass the means test.
The Means Test Is Just the Starting Point
Passing the means test is a necessary condition for filing Chapter 7, but not a sufficient one. Even if you pass, the bankruptcy trustee and the U.S. Trustee's office can challenge a Chapter 7 filing on other grounds — particularly if your actual current income is significantly higher than your 6-month average, or if there is other evidence of bad faith.
The means test form (Official Form 122A) must be filed with your bankruptcy petition. An attorney will calculate it carefully and identify any issues before you file.