Current Monthly Income for the Bankruptcy Means Test

By , Attorney

Not everyone is qualified to have their debts wiped out or "discharged" in a Chapter 7 bankruptcy case. Unless you qualify for an exception, you must complete and pass the "means test." The means test measures several things, including:

  • whether your income is less than your state's median income
  • whether you have disposable income available to pay back some or all of your debt in a Chapter 13 case, and
  • the length of time of the Chapter 13 repayment plan (three years if under the median and five years above).

Here we explain what makes up the current monthly income and the calculations necessary for the bankruptcy means test form.



What Is the Means Test?

You'll come across the means test when you complete the forms you file to start a Chapter 7 case. The test consists of three forms, but you might not need to fill all of them out.

The First Bankruptcy Means Test Form

The first form, Chapter 7 Statement of Your Current Monthly Income (Form 122A-1), helps you calculate your current monthly income (CMI) and yearly income for bankruptcy purposes. You'll start by listing all gross income received during the six full months before your bankruptcy filing date.

You'll pass the test as long as your income doesn't exceed the state median income. To get the correct comparison figure, you'll divide your gross figure by six and multiply it by twelve before comparing it to the state's annual median income figure.

If you pass this portion of the test, it won't be necessary to fill out additional forms.

The Second Bankruptcy Means Test Form

If your income is higher than your state's median income, you'll get a second chance to pass the means test by completing the second form, Chapter 7 Means Test Calculation (Form 122A-2).

You'll deduct allowed expenses from your income, such as housing costs, utilities, child care, taxes, insurance, and tithing. The calculations will determine whether you have any disposable income to pay debts. If you don't have much left over, you'll pass the test and will qualify to receive a Chapter 7 discharge. Otherwise, you'll likely have to consider filing for Chapter 13 bankruptcy.

The Third Bankruptcy Means Test Form (You Might Want to Look at This Form First)

Some people can avoid taking the means test altogether. For instance, disabled veterans, servicemembers engaged in active duty during particular periods, and individuals with primarily business debt (instead of consumer debt) are exempt from the means test requirement. You'll report your exempt status on the third form, the Statement of Exemption from Presumption of Abuse Under § 707(b)(2).

Find additional information about the bankruptcy means test.

What's Considered Your Current Monthly Income?

If you're wondering how to calculate your current monthly income or "CMI," as referenced in the section "The First Bankruptcy Means Test Form" above, this is how you'll do it.

For the means test purposes, your CMI is the average monthly income you receive from all sources during the full six-month period before your filing date.

For instance, if you planned to file your bankruptcy paperwork on November 20, 2020, you'd include all income received starting May 1, 2020, and continuing through October 31, 2020.

To get your CMI, add up the total income you received from all sources during the six-month look-back period, and then divide by six to come up with your average monthly income. If the income is from wages, use the gross amount. Before comparing your income to your state's yearly median income, you'll change the CMI to a yearly amount by multiplying it by twelve.

You'll find your state's yearly median income figures on the U.S. Trustee Program website. If your yearly amount doesn't exceed your state's median income, you'll pass. You won't need to complete additional forms.

If you don't pass the first portion of the means test, you'll be able to deduct your income tax and other expenses when completing the second form.

What Income Should You Include in Your Current Monthly Income?

You must include all of your income, whether it is taxed or not, except the following:

  • payments you received under the Social Security Act (including Social Security Retirement, SSI, SSDI, and TANF)
  • payments to victims of war crimes or crimes against humanity, and
  • payments to victims of international or domestic terrorism.

Here are some examples of income you should include (this list is not exhaustive):

  • wages, salary, tips, bonuses, overtime, and commissions
  • net income from the operation of a business, profession, or farm (the amount you report as taxable income, after subtracting reasonable and necessary business expenses on IRS Schedule C)
  • interest, dividends, and royalties
  • net income from rents and other real property income
  • pension and retirement income
  • regular contributions to the household expenses of the debtor or the debtor's dependents, including child or spousal support
  • regular contributions by the debtor's spouse (unless you are legally separated)
  • unemployment compensation
  • workers' compensation insurance
  • state disability insurance, and
  • annuity payments.

When Your Income Isn't Regular

If you are employed and get a regular paycheck in the same amount each pay period, it will probably be easy to calculate your CMI. A court might be willing to calculate your CMI differently if your income is irregular. A good bankruptcy attorney can explain local practices and advocate for an interpretation of CMI advantageous to you.

Need More Bankruptcy Help?

Did you know Nolo has been making the law easy for over fifty years? It's true—and we want to make sure you find what you need. Below you'll find more articles explaining how bankruptcy works. And don't forget that our bankruptcy homepage is the best place to start if you have other questions!

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We wholeheartedly encourage research and learning, but online articles can't address all bankruptcy issues or the facts of your case. The best way to protect your assets in bankruptcy is by hiring a local bankruptcy lawyer.

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