The Means Test | Lizarraga Law Firm, PLLC

Practice Areas / Bankruptcy / Chapter 7 / The "Means Test"

If the annual median family income exceeds the applicable state median family income then the means test must be applied. Calculation of the means test must be made pursuant to a complex formula outlined in Sect. 707(b)(2)(A). It should be noted that the means test also only applies to debtor's who have "consumer debt". As a result a debtor with substantial business debts would not have to be subject to the means test.

• The means test formula begins with the current monthly income and deducts certain allowed expenses to come up with a monthly amount that is presumed to be available for payment to the general unsecured creditors.

• The formula substitutes IRS Standard Expenses (these are a combination of Local Standards, which vary depending on the cost of living where the debtor resides, for expenses like housing and transportation, and National Standards, with no local variations, for other expenses like food and clothing). It also includes deductions from income for monthly payments made for secured debt and priority claims.

Outline of Current Monthly Income Calculation where the income exceeds the Median Family Income:

Total current monthly income, and

- Subtract monthly IRS Standard Expenses,
- Subtract monthly specified real expenses (e.g. tuition up to $2,575 annually per child),
- Subtract monthly payments on secured claims (total amount divided by 60),
- Subtract monthly payments on priority claims (total amount divided by 60), then
- Remainder equals Net Monthly Amount (available to pay non-priority, unsecured, claims)

Then;

Take the Net Monthly Amount and multiply by 60 months, which will equal 5 year total amount.

A presumption of abuse arises if after all the deductions the net monthly amount times 60 is the lesser of $17,150 or 25% of the general unsecured debt, as long as that 25% is at least $10,275.

Sources

Median family income: U.S. Trustee Program, Census Bureau Median Family Income (cases filed on or after July 15, 2026).
Means-test dollar thresholds effective April 1, 2025: Judicial Conference adjustment, 90 Fed. Reg. (Feb. 4, 2025), under 11 U.S.C. § 104 and § 707(b).

This information is general and is not legal advice.