What is a “means test”?
A “means test” is a two-part calculation which looks at the debtor’s current monthly income and allowable expenses to see if the debtor has net income available to pay creditors. The debtors’ ability to repay creditors determines whether they are eligible for Chapter 7 (discharge without repayment of debts) and/or Chapter 13 bankruptcy (discharge with repayment of debts). The “means test” applies only to individual debtors with primarily consumer debts.
Generally, if the debtor passes the “means test,” the debtor will be allowed to proceed with Chapter 7 to discharge all dischargeable debts without repayment, unless it is shown that the debtor filed the petition in bad faith or the totality of circumstances of the debtor’s financial situation demonstrates abuse.
If the debtor does not pass the “means test”, the bankruptcy court must either dismiss the Chapter 7 case or, with the debtor’s consent, convert it to a Chapter 13 case to re-organize and repay the debts to the extent required, unless the debtor can prove “special circumstances”.
Chapter 7
Income Requirement
To pass the means test to discharge debts in Chapter 7 without repayment:
the debtor’s current monthly income must be either below the state median for the debtor’s household size, or
the debtor’s projected re-payment capacity amount must be lesser than 25% of the debtor’s non-priority unsecured claims or $9,075, whichever is greater, or lesser than $15,150.
Florida FFY 2025
Median Income
| 1-Person Household | 2-Person Household | 3-Person Household | 4-Person Household |
| $63,916 | $78,785 | $91,290 | $104,626 |
*add $9,900 for each individual in excess of 4
To use the median family income for Florida, the debtor must have domiciled in Florida, for at least 730 days prior to filing of bankruptcy petition. If the debtor has not domiciled in Florida for at least 730 days, then the debtor would be using the median income of the state in which the debtor domiciled for the longest portion of the 180 days preceding the 730 days before filing, or during the 731-911 days before filing.
first step of Means test
Current Monthly Income
The first step in applying the “means test” is to calculate the debtors’ gross current monthly income.
Current monthly income is the average gross monthly income the debtor receives from all sources during the previous six calendar months and it includes, among other things, wages, salary, tips, bonuses, overtime payments, commissions, interest, dividends, royalties, rent income, pension and retirement income, unemployment compensation, workers’ compensation insurance benefits, disability insurance benefits, annuity payments, regular financial contributions from another person or entity, child support and alimony, taxable and non-taxable income.
Current income excludes the following:
(1) Social Security benefits, payments to victims of war crimes or crimes against humanity, payments to victims of international terrorism or domestic terrorism, and government payments related to military service (pension, pay, annuity, or allowance) for to a disability, combat-related injury or disability, or death of a member of the uniformed services, and
(2) Child support payments, foster care payments, or disability payments for a dependent child to the extent reasonably necessary for the child’s support
no presumption of abuse
Current Monthly Income Below Median
If the debtor’s current monthly income falls below the state median for the debtor’s household size, the debtor presumptively passes the “means test” and the test typically ends here.
However, the bankruptcy judge or the trustee still may file a motion to dismiss the case if the debtor filed the petition in bad faith or the totality of circumstances of the debtor’s financial situation demonstrates abuse.
As an alternative to the dismissal for abuse, the debtor may consent to convert Chapter 7 to Chapter 13, which would provide for a 3 year re-payment plan.
second step of means test
Current Monthly Income Above Median
If the debtor’s current monthly income is above the state median, the completion of the rest of the “means test” analysis is required. To complete the means test, 3 additional figures need to be calculated:
The debtor’s net monthly income (or disposable income)
It is calculated by subtracting from the current monthly income all permitted monthly expenses.
The debtor’s total projected re-payment capacity over the life of the Chapter 13 repayment plan
It is calculated by multiplying the debtor’s net monthly income by 60.
The debtor’s non-priority unsecured debts.
Total sum of non-priority unsecured debts from Schedule E/F, Part 2.
no presumption of abuse
Repayment Capacity Below $9,075
To pass the means test, the debtor’s projected re-payment capacity amount must be lesser of:
1) 25% of the debtor’s non-priority unsecured claims or $9,075, whichever is greater;
or
2) lesser than $15,150.
In other words, the debtor always passes the test if the debtor’s projected re-payment capacity is less than $9,075 (or less than $151.25 per month.)
presumption of abuse
Repayment Capacity
Above $15,150
The presumption of abuse always arises, and the debtor does not pass the means test if the debtor’s projected re-payment capacity is over $15,150 (or more than $252.50 per month).
presumption of abuse or no presumptio of abuse
Repayment Capacity
Between $9,075 -15,150
If the debtor’s total repayment capacity is between $9,075 – 15,150, the debtor can pass the means test only if the debtor’s total repayment capacity is less than 25% of the unsecured debts.
If the debtor’s total repayment capacity is more than 25% of the unsecured debts, the presumption of abuse arises, but the debtor may try to rebut the presumption by demonstrating special circumstances, such as serious medical condition or a call or order to active duty in the armed services.
To rebut the presumption, the debtor must show necessity, reasonableness, and lack of reasonable alternative to be able to deduct the additional expenses to increase the total permitted expenses or reduction in income to bring the monthly net income (disposable income) below the threshold amount.
If the debtor is unable to rebut the presumption of abuse, warranting a dismissal of Chapter 7 case, as an alternative to the dismissal, the debtor may consent to convert Chapter 7 to Chapter 13, which would provide for a 5 year re-payment plan.
Permitted Expenses
One of the main components of the “means test” is determining the expenses the debtor is allowed to deduct to arrive at the debtor’s net monthly income or monthly disposal income.
The permitted expenses are the living expenses, secured debt payments and priority debt payments.
How can we help?
The “means test” is a calculation that determines the debtor’s eligibility for Chapter 7 and/or Chapter 13 bankruptcy. The calculation uses the debtor’s current monthly income and permitted expenses to determine the debtor’s repayment capacity. The current monthly income for purposes of the “means test’ is not the actual current monthly income of the debtor, but a bankruptcy specific calculation. Likewise, not all of the expenses that the debtor can deduct from the current monthly income are actual expenses – many are limited by the National and Local Standards. So, the “means test” calculation can get white complex. Additionally, even if there is a presumption of abuse based on the “means test” calculation, it can rebutted if there are special circumstances, which require additional calculation and documentation and explanation. Afterall, the “means test” is a mechanical approach, which can often lead to disposable income being more than it actually is.
The debtor’s chances of successful bankruptcy are better with legal representation than without it. Timing of the bankruptcy filing is also critical not only for the “means test” calculation, which determines the debtor’s eligibility for bankruptcy, but also to maximize the discharge potential since it can affect the dischargeability of time-dependent debts and retention of assets. We thoroughly review and evaluate each case to determine whether bankruptcy is appropriate, whether it is the best option, and whether it is filed at the right time.
At Anna Handy Law Firm, P.A., we are acutely aware of the financial strain of our clients. We do not charge you for the initial phone consultation. We do not push you to file bankruptcy to get a retainer. We don’t judge – we find solutions. We give you honest advice about your options and rights, including the “doing nothing” approach. As such, we offer very affordable bankruptcy fees. We make our fees competitive and in certain cases, we offer payment plans to address each case individually as each case has a different set of circumstances.
If you are overburdened by your debts, being sued or harassed by creditors, or subject to wage garnishment, do not hesitate to call us now for a free initial phone consultation. The attorney’s direct business cell phone number is (386) 248-3000. You may also email us at [email protected].