Means Test Failure -- Now What?

How the means test works

The means test under 11 U.S.C. § 707(b)(2) is a two-step income analysis:

1. Step 1: Compare your income to the state median. If your current monthly income (averaged over the 6 months before filing) is below your state's median income for your household size, you pass. No further analysis needed.
2. Step 2: Calculate disposable income. If your income exceeds the median, subtract allowed expenses (IRS standards, actual secured debt payments, and other deductions). If the result shows you could pay at least $8,175 over 60 months (or 25% of your unsecured debt), a presumption of abuse arises.

What the presumption of abuse means

If the means test creates a presumption of abuse, it does not automatically dismiss your case. The U.S. Trustee reviews the results and may file a motion to dismiss under § 707(b). You then have the opportunity to rebut the presumption by showing "special circumstances" that justify additional expenses or income adjustments.

Special circumstances can include: serious medical conditions, call to active military duty, or other documented, unusual expenses that the standard means test does not capture.

Your options if you fail

• Rebut the presumption. Show special circumstances that reduce your disposable income below the threshold.
• Convert to Chapter 13. Chapter 13 has no means test. Your income determines your plan payment, not your eligibility. Under 11 U.S.C. § 706(a), you have the right to convert.
• Wait and refile. If your income is temporarily high (overtime, bonus, seasonal work), waiting until it normalizes may change the means test result. The test uses a 6-month lookback.
• Adjust deductions. Legitimate increases in expenses -- higher mortgage payments, medical costs, childcare -- can change the calculation.