Bankruptcy Means Test

The most noteworthy change brought by the 2005 Bankruptcy Abuse Prevention Act and Consumer Protection Act occurred within 11 U.S.C. § 707(b). The amendments effectively subject most debtors who make above a state’s median income, as calculated by the Code, to an income-based test.

This test is referred to as the “means test.” The means test provides for a finding of abuse if the debtor’s income is higher than a specified portion of their debts. If a presumption of abuse is found under the means test, it may only be rebutted in the case of “special circumstances.” Debtors whose income is below the state’s median income are not subject to the means test.

Notably, the Code calculated income may be higher or lower than the debtor’s actual income at the time of filing for bankruptcy. This has led some commentators to refer to the bankruptcy code’s “current monthly income” as “presumed income.” If the debtor’s debt is not primarily consumer debt, then the means test is inapplicable.