The Means Test: Gateway to Chapter 7
The means test is the primary obstacle standing between Florida residents and Chapter 7 bankruptcy relief. Enacted as part of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), the means test under 11 U.S.C. Section 707(b) is designed to identify debtors who have sufficient income to repay a meaningful portion of their debts and should therefore file Chapter 13 instead.
Understanding how this test works -- and how to pass it -- is critical for any Florida resident considering Chapter 7.
Step One: Calculate Your Current Monthly Income
The means test begins with a figure called "current monthly income" (CMI), which is defined under 11 U.S.C. Section 101(10A). Despite the name, this is not simply what you earned last month. CMI is calculated by:
- Identifying the six-month lookback period -- Take the full six calendar months immediately preceding the month in which you file your bankruptcy case
- Totaling all income sources -- Add up all gross income received during those six months from every source, including wages, salary, overtime, bonuses, commissions, self-employment income, rental income, pension or retirement distributions, unemployment compensation, and regular contributions from others toward household expenses
- Dividing by six -- The total is divided by six to produce your average monthly figure
Notably, CMI does not include Social Security benefits or payments received under the Social Security Act. This exclusion, codified in 11 U.S.C. Section 101(10A)(B), can make a significant difference for Florida retirees or disabled individuals whose primary income is Social Security.
Step Two: Compare Against Florida Median Income
Once your CMI is calculated, it is annualized (multiplied by 12) and compared against the median household income for Florida based on your household size. The U.S. Trustee Program publishes updated median income figures periodically, drawn from Census Bureau data.
Approximate recent Florida median income thresholds (these change regularly, so verify current figures at the time of filing):
- 1-person household -- Approximately $57,000 to $62,000
- 2-person household -- Approximately $72,000 to $78,000
- 3-person household -- Approximately $82,000 to $88,000
- 4-person household -- Approximately $97,000 to $103,000
- Each additional member -- Add approximately $9,000 to $10,000
If your annualized CMI falls below the applicable Florida median for your household size, you pass the means test automatically. Your Chapter 7 eligibility is established, and no further calculation is necessary. This is the simplest and most common path to qualification.
Step Three: The Below-Median Advantage
For below-median-income debtors, passing the means test is straightforward. There is a presumption that the filing is not abusive, and the U.S. Trustee is unlikely to challenge your eligibility. The only form required is the "Chapter 7 Statement of Your Current Monthly Income" (Official Form 122A-1).
This is particularly significant in Florida, where the cost of living varies dramatically between regions. A debtor in Pensacola may have a very different income profile than one in Miami, but both are measured against the same statewide median.
Step Four: Above-Median Expense Deductions
If your annualized CMI exceeds the Florida median, you are not automatically disqualified. You proceed to the second phase of the means test on Official Form 122A-2 (the "Chapter 7 Means Test Calculation"), which deducts allowable expenses from your income to determine your disposable income.
The expense deductions fall into several categories:
- IRS National Standards -- Standardized allowances for food, clothing, housekeeping supplies, personal care, and miscellaneous expenses. These are fixed amounts based on household size, regardless of your actual spending.
- IRS Local Standards -- Allowances for housing and utilities (based on the county where you live in Florida) and transportation ownership and operating costs. Florida debtors in high-cost counties like Miami-Dade or Palm Beach may receive larger housing deductions than those in lower-cost areas.
- Actual secured debt payments -- Your average monthly payments on secured debts such as mortgages and car loans over the next 60 months are deductible.
- Priority debt payments -- If you owe priority debts like certain taxes or domestic support arrearages, a monthly pro-rata amount is deductible.
- Special circumstances -- Under 11 U.S.C. Section 707(b)(2)(B), additional expenses may be claimed if you can document special circumstances such as a serious medical condition or a call to active military duty.
- Other deductions -- Mandatory payroll deductions, health insurance premiums, disability insurance, health savings account contributions, childcare expenses, and court-ordered payments are also factored in.
The Disposable Income Calculation
After deducting all allowable expenses from your CMI, the remaining figure is your monthly disposable income. This number is multiplied by 60 (representing a hypothetical five-year Chapter 13 plan) to produce your total disposable income over five years:
- If the 60-month total is below $8,475 (approximately $141.25 per month), you pass the means test even though your income exceeds the median
- If the 60-month total exceeds $14,125 (approximately $235.42 per month), a presumption of abuse arises and you likely cannot file Chapter 7
- If the total falls between $8,475 and $14,125, the presumption of abuse arises only if that amount would pay 25% or more of your nonpriority unsecured debts
These threshold figures are subject to periodic adjustment by the Judicial Conference.
Common Strategies and Considerations
Several legitimate factors can affect your means test outcome:
- Timing your filing -- Because the means test uses a six-month lookback, the month you choose to file matters. If you recently lost a job or had an unusually high-earning period that ended, waiting a few months may allow the higher income to fall out of the calculation window.
- Household size -- Larger households have higher median income thresholds and larger expense allowances. Correctly determining household size (which can include dependents who do not file with you) is important.
- Marital filing status -- If you file individually, your spouse's income is included in CMI but your spouse's separate expenses may be deductible as a "marital adjustment" on the means test form.
- Business income and expenses -- Self-employed debtors must carefully account for business income and ordinary, necessary business expenses during the lookback period.
When the Means Test Blocks Chapter 7
If you cannot pass the means test, Chapter 13 remains available. Many above-median-income Florida debtors find that Chapter 13 provides effective debt relief through a structured repayment plan, often paying only a fraction of unsecured debts while protecting their assets and curing mortgage arrears.
An experienced Florida bankruptcy attorney can run the means test calculations using your actual financial data and advise you on the best timing and strategy for filing.