Means Test

Means Test – Exclusion from Chapter 7 Bankruptcy

If a debtor’s income is greater than an amount that varies by the number of dependants and household members, the debtor may not file a Chapter 7 bankruptcy petition. This is known as the 707(b) exclusion. This was designed to force debtors to pay off debts over 5 years in Chapter 13. The means test is long and complicated. Because it is subject to various interpretations, lawyers cannot be certain that it will not be recalculated by the trustee or the bankruptcy court. What follows is an outline of the test. An important exception to this exclusion applies if the majority of debt is business debt.

Calculation of Income for the Purposes of the Means Test



1. Gross Wages, Salary, Tips, Bonuses, Overtime, Commissions.

2. Income from the operation of a business, profession or farm

3. Rent and other real property income.

4.  Interest, dividends, and royalties

5.  Pension and retirement income.

6. Any amounts paid by another person or entity, on a regular basis, for the household expenses of the debtor or the debtor’s dependents, including child or spousal support.   7.  Unemployment compensation.

8. Income from all other sources.

B. APPLICATION OF 707(b) Exclusion

1.  Determine applicable median family income.

C. CALCULATION OF Currently Monthly Income for 707(b)(2)

1. Determine Marital Adjustment

D. CALCULATION OF Deductions Allowed under 707(b)(2)

1.  National Standards: food, clothing, household supplies, personal care, and miscellaneous.

2. Local Standards: housing and utilities; non-mortgage expenses.

3. Local Standards: housing and utilities; mortgage/rent expense.

4. Local Standards: housing and utilities; adjustment.

5. Local Standards: transportation; vehicle operation/public transportation expense.

6.  Local Standards: transportation ownership/lease expense; Vehicle 1.

7.  Local Standards: transportation ownership/lease expense; Vehicle 2.

8. Other Necessary Expenses: taxes.

9. Other Necessary Expenses: mandatory payroll deductions.

10.  Other Necessary Expenses: life insurance.

11. Other Necessary Expenses: court-ordered payments.

12. Other Necessary Expenses: education for employment or for a physically or mentally challenged child.

13. Other Necessary Expenses: childcare.

14. Other Necessary Expenses: health care.

a. Expenses not reimbursed by insurance

15. Other Necessary Expenses: telecommunication services.

E. ADDITIONAL EXPENSE Deductions Under § 707(b)

1. Health Insurance, Disability Insurance, and Health Savings Account Expenses.

2. Continued contributions to the care of household or family members.

a. Health care expenses

3. Protection against family violence.

4. Home energy costs.

5. Education expenses for dependent children less than 18.

6. Additional food and clothing expense.

7. Continued charitable contributions.

F. DEDUCTIONS FOR Debt Payments.

1. Future payments on secured claims.

2.Other payments on secured claims.

3. Payments on priority claims.

G. ADDITIONAL Expense Claims

1. Other Expenses.

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