I Failed the Bankruptcy Means Test: Now What? Part 1

Posted by Wesley Scott on December 21, 2020 at 6:30 AM
Wesley Scott

A hand holding a pen as it writes onto a Bankruptcy Means Test on a white piece of paper on a reflective glass desk.The Bankruptcy Means Test is a legislative attempt at a formula that measures the ability of debtors to repay unsecured creditors over a period of time. The means test is a backward-looking litmus test using mathematical computations to help the court determine if the debtor is abusing the system by filing a Chapter 7 bankruptcy. The objective of the bankruptcy means test was to remove judicial discretion from the process of determining if the abuse exists.

The debtor’s means test reflects the debtor’s applicable expense using the IRS national and local standards, and from this point, adjustments can be made based on the debtor’s actual financial circumstances. But one needs to remember that the means test was intended to ensure that those who can afford to repay some portion of their unsecured debts to be required to do so.

If it is determined that a debtor will have disposable income sufficient to pay a significant amount of his unsecured debt, the Chapter 7 case will be dismissed, unless the debtor converts his case under Chapter 13.

The debtor has the ability to rebut the presumption of abuse by showing “special circumstances” demonstrating that adjustments to income or additional expenses should be considered in reaching a conclusion of whether the presumed abuse really exists. The US Trustee’s Office does have the ability to decline to press a motion under the presumption if it concludes the motion would not be appropriate.

Debtors must show that there is no reasonable alternative to each added expense or suggested change in income. Debtors must also attest under oath to the accuracy of the information they provide. And then the presumption will only be rebutted if such income adjustments and added expenses bring the final number below the means test thresholds.

It is also important to note that the fact that a debtor passes the Bankruptcy Means Test does not insulate the case from dismissal. It means only that the debtor’s case is not presumed abusive.


Failing the means test is not a complete stop to filing bankruptcy. The debtor can rebut the presumption, or the debtor can convert to a Chapter 13 bankruptcy. Stay tuned for Part 2 of this blog.


Topics: Means Testing

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