Introduction: What Is the Means Test for Chapter 13 Bankruptcy?

When people consider filing for bankruptcy, they often hear about the “means test.” Many assume it applies only to Chapter 7 bankruptcy, but the means test plays a critical role in Chapter 13 as well. In fact, the means test directly determines the amount you must pay to unsecured creditors under a Chapter 13 repayment plan. Understanding how this calculation works is essential for anyone exploring Chapter 13 as a path to debt relief.

Chapter 13 bankruptcy is designed for individuals with a regular income who can commit to a three-to-five-year repayment plan. The court requires that your plan devote all “projected disposable income” to unsecured creditors. The means test provides the formula for computing that disposable income. If you miscalculate or fail to account for allowable expenses, your plan may be rejected or you might pay more than necessary. This article walks you through every step of the means test for Chapter 13, from income comparisons to expense deductions, so you can approach your case with confidence.

What Is the Means Test?

The means test was created as part of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005. Its original purpose was to prevent higher-income debtors from abusing Chapter 7 bankruptcy by wiping out debts they could reasonably repay. The test uses a standardized formula to compare your income against state median incomes and then calculates your “disposable income” based on IRS expense allowances.

For Chapter 13, the means test serves a different but equally important function: it sets the floor for how much you must contribute to unsecured creditors. Even though Chapter 13 requires you to propose a repayment plan, the court will not confirm that plan unless it meets certain statutory requirements. One of those requirements is that you pay all of your “projected disposable income” for the applicable commitment period (three years if your income is below the median, five years if it is above). The means test is the tool used to calculate that disposable income.

Who Must Take the Means Test for Chapter 13?

Every individual debtor who files for Chapter 13 must complete the means test. There is no income-based exemption; even if your income is very low, you still need to fill out the form (Official Form 122C-1). However, the results of the test determine your repayment obligations:

  • Below-median income debtors: If your current monthly income (CMI) is less than the median income for your household size in your state, you are considered a “below-median” debtor. Your means test stops at the income comparison. You are still required to pay disposable income over three years, but the calculation follows a simpler path based on your actual expenses.
  • Above-median income debtors: If your CMI exceeds the state median, you must complete the entire means test. This means deducting allowed expenses from your income to arrive at “monthly disposable income.” For above-median debtors, the repayment plan must run for five years, and the means test determines the minimum payment to unsecured creditors.

It is important to note that even if you are below-median, you may still need to take the full test if your case involves special circumstances (discussed later). But in most cases, the median comparison alone dictates which path you follow.

How the Means Test Works in Chapter 13

The means test is a two-part process. Part one compares your income to the state median. Part two calculates your disposable income if you exceed that median. Let’s examine each step in detail.

Step 1: Income Comparison

Your “current monthly income” (CMI) is the starting point. CMI is defined as the average monthly income you received from all sources during the six calendar months before filing. This includes wages, self-employment income, rental income, unemployment benefits, Social Security (though some parts may be exempt), and virtually any other regular source. It does not include Social Security benefits received as a dependent of another person under certain circumstances, or benefits from the Railroad Retirement Act.

Once you calculate your CMI, you compare it to the median income for a household of your size in your state. The U.S. Trustee publishes updated median income figures every year (usually in April and November). You can find them on the U.S. Trustee Program website. If your CMI is at or below that median, you are “below-median” and the means test is complete. If your CMI exceeds the median, you proceed to Step 2.

Example: Suppose you are a single filer in California. In 2025, the median annual income for a one-person household in California is around $79,000. If your six-month average income is $6,000 per month ($72,000 per year), you are below the median and do not need to calculate disposable income using IRS standards. Your plan will still require you to pay all disposable income, but the disposable income is calculated using your actual budgeted expenses (within reason).

Step 2: Disposable Income Calculation (for Above-Median Debtors)

If your income exceeds the state median, you must complete the entire means test form, subtracting standardized expense amounts from your CMI. The result is your “monthly disposable income” – the minimum amount you must pay to unsecured creditors each month for the duration of your plan.

The expenses allowed are not simply what you actually spend. Instead, you use IRS National Standards and Local Standards for many categories, such as food, clothing, housing, utilities, transportation, and more. These standards set maximum allowable amounts. For example, the IRS National Standard for food and clothing for a one-person household might be around $750 per month. If you actually spend $600, you can only deduct $600. But if you actually spend $1,000, you can still only deduct the standard amount of $750 unless you have special circumstances.

The means test also allows deductions for actual secured debt payments (e.g., mortgage, car loan) and priority debts (e.g., taxes, child support). Certain expenses like health insurance, education (limited), and charitable contributions are permitted in specific situations.

Calculating the Means Test: A Detailed Guide

Completing the means test form (Form 122C-1) requires careful financial information. Here is a breakdown of the major components.

Types of Income Included in Current Monthly Income

CMI is broader than your paycheck. You must include:

  • Wages, salaries, tips, bonuses, commissions. Use the average over six months.
  • Self-employment income. Include gross income minus ordinary business expenses.
  • Rental income. Net income after property expenses.
  • Pension, Social Security, unemployment, disability. Note: Social Security is excluded from CMI for means test purposes if you are not required to include it because of amendments, but current guidance treats Social Security as part of CMI for Chapter 13 (though it is not counted for the median comparison). This is a nuance; consult a professional.
  • Investment income. Dividends, interest, and capital gains.
  • Regular contributions. Money from family members that is steady and predictable.

One-time or irregular income (e.g., an inheritance or gift) is generally not included in CMI for the means test, but may affect disposable income in your plan.

Allowable Expenses and Deductions

The means test uses a combination of IRS standards and actual expenses. The major categories are:

  • IRS National Standards: Food, clothing, housekeeping supplies, personal care, and miscellaneous. These are fixed amounts based on household size and income. You cannot deduct more than the standard, even if you spend more.
  • IRS Local Standards: Housing and utilities (rent or mortgage, property taxes, insurance, maintenance, gas, electric, water) and transportation (vehicle operation, public transit, and ownership costs). Local standards vary by county and region.
  • Actual secured debt payments: Mortgage principal and interest, car loan payments, and other secured debts. You can deduct the actual contract amounts.
  • Priority debts: Back taxes owed to the IRS or state, child support arrears, and other unsecured priority claims. You can deduct the average monthly amount you will need to pay over the plan.
  • Health insurance and out-of-pocket medical costs. You may deduct actual medical insurance premiums and expenses that exceed 10% of your income (subject to limits).
  • Education expenses: Limited to required school tuition and fees for dependent children. Generally, voluntary private school tuition is not deductible unless there is a special need.
  • Taxes not already included. Deduct payroll taxes and average monthly income tax payments.
  • Other necessary expenses. Some courts allow deductions for childcare, court-ordered payments, involuntary loans (like student loans), and other items if you can prove they are reasonable and necessary.

After subtracting all allowed expenses from CMI, you get your “monthly disposable income.” This number times 60 (for a 5-year plan) is the minimum total payment to unsecured creditors – unless you can propose a plan that pays all debts in full sooner.

Special Circumstances and Hardship Exceptions

Sometimes the standardized expense amounts do not reflect your actual costs. The bankruptcy code allows above-median debtors to request a “special circumstances” adjustment. This is not a free pass. You must file a separate motion and provide detailed documentation showing that an expense is necessary and not covered by the standards. Common examples include:

  • Medical expenses for a chronically ill family member that exceed the IRS allowance.
  • Higher housing costs due to a disability accommodation or unusual local market.
  • Education costs for a disabled child requiring specialized schooling.
  • Care of an elderly parent if you are providing direct financial support.

If the court grants a special circumstances adjustment, it will reduce your means test disposable income. This can be a powerful tool, but it requires strong evidence and often the assistance of an experienced bankruptcy attorney.

Implications of the Means Test for Chapter 13 Qualification

The means test does not determine whether you can file Chapter 13 – Chapter 13 eligibility is based on having regular income and debt limits under $2.75 million (as of 2025). What the means test determines is how much you must pay. Therefore, a “failed” means test for Chapter 13 is not a disqualification but rather a signal that your plan must be more generous to unsecured creditors.

If your means test shows high disposable income, your plan payments will be higher. If your disposable income is zero or negative, you may propose a plan that pays only priority and secured debts, leaving unsecured creditors with little or nothing – but you still need to propose payments over three years. This scenario often happens when your CMI is below median or your expenses are high.

If you are above-median and your means test calculation shows a meaningful amount of disposable income, the court will require that amount to be paid into the plan each month. Failure to make those payments can lead to dismissal or conversion to Chapter 7. However, if your financial situation changes during the plan (e.g., job loss), you can request a modification.

It is also important to understand that the means test is just one part of the Chapter 13 confirmation process. You must also meet other tests, such as the “best interest of creditors” test (unsecured creditors must receive at least what they would get in a Chapter 7 liquidation) and the “good faith” requirement. The means test interacts with these, but it is often the initial hurdle.

Common Misconceptions About the Means Test in Chapter 13

Many people believe myths that can lead to costly mistakes. Let’s clear them up:

  • Myth: The means test only applies to Chapter 7. False. As detailed above, the means test directly dictates the minimum plan payment in Chapter 13 for above-median debtors.
  • Myth: If you pass the means test, you don’t need a repayment plan. False. Even if your means test shows zero disposable income, you still must propose a plan to pay secured and priority debts. You cannot simply walk away in Chapter 13.
  • Myth: You can deduct all your actual expenses. Not entirely accurate. For above-median debtors, many expense categories are capped by IRS standards. For below-median debtors, you can use actual expenses, but the court still reviews them for reasonableness.
  • Myth: The means test is optional. False. Every Chapter 13 debtor must file Form 122C-1 with the court. Failure to do so can result in dismissal.
  • Myth: Social Security income is always exempt. Partial truth. Social Security benefits are excluded from the definition of “current monthly income” for the median comparison, but the official form includes Social Security income in the income calculation for the purpose of disposable income. Always check the current instructions.

Practical Steps to Prepare Your Means Test

Because the means test involves complex calculations and legal rules, taking these steps can help you prepare:

  1. Gather six months of pay stubs. For employees, collect pay stubs from the six full calendar months before filing. For self-employed, compile profit-and-loss statements.
  2. List all sources of income. Include alimony, rental income, and any other regular cash flow.
  3. Document your expenses. Keep receipts and bank statements for food, housing, utilities, medical, and transportation. You will need to show either actual spending or that you qualify for standard deductions.
  4. Identify secured debts and priority debts. Mortgage statements, car loan agreements, tax transcripts, and child support orders.
  5. Use the correct median income figures. Check the U.S. Trustee’s means testing page for the most recent state median income data.
  6. Consider hiring a bankruptcy attorney. The means test is not a DIY project for everyone. A small mistake in expense categorization can cost you thousands of dollars in extra plan payments.

Many courts also provide detailed instructions on their websites. For example, the U.S. Courts Bankruptcy Forms page contains the official forms and instructions for Form 122C-1.

When the Means Test Works in Your Favor

While the means test may seem like an obstacle, it can actually benefit debtors. For above-median filers, the use of IRS expense standards means that even if you spend less than the standard on food or clothing, you can still deduct the higher standard amount in many cases. This can effectively lower your disposable income. For example, the IRS National Standard for a family of four might be $1,500 per month for food and clothing, but if you actually spend only $1,200, you can still use the standard $1,500 (check the form instructions – some versions allow you to claim the standard only if you actually incur the expense). Actually, the rule is that you deduct the standard or your actual, whichever is less, unless you have special circumstances. This is a common nuance. So careful reading is essential.

Additionally, the means test can protect you if your income is below median. In that case, you are not subject to the IRS expense caps, so you can use your actual reasonable expenses. If you have high mortgage payments or medical bills, your disposable income may be negative, allowing you to propose a plan with minimal payments to unsecured creditors.

Conclusion: Taking the Next Step with the Means Test

The means test for Chapter 13 bankruptcy is not a barrier to filing – it is a framework that ensures fair treatment of both debtors and creditors. By understanding how it works, you can anticipate the minimum payments required in your repayment plan and avoid surprises. Every year, thousands of people successfully complete Chapter 13 plans and obtain debt relief. The key is to prepare accurately and seek professional help when needed.

If you are considering Chapter 13, start by reviewing your income against the state median. Then, if you are above-median, carefully calculate your allowable expenses using the latest IRS standards. Do not guess. The IRS Collection Financial Standards are updated periodically and available online. Finally, consult with a local bankruptcy attorney who can run the numbers for your specific situation. The cost of a consultation is a small price compared to the money you could save by structuring your plan correctly.

Remember that the means test is just one piece of the Chapter 13 puzzle. You also need to comply with credit counseling requirements, file all schedules and statements, and propose a feasible plan. But mastering the means test gives you a solid foundation for moving forward with confidence.