Above-Median Income Debtors and the Bankruptcy Means Test

The bankruptcy means test sorts individual debtors into distinct legal tracks based on income relative to state median figures. For debtors whose income falls above the applicable median, a second, more demanding layer of analysis applies — one that can restrict access to Chapter 7 liquidation or determine the required length of a Chapter 13 repayment plan. This page examines the statutory definition of above-median status, the mechanical steps of the extended means test, the most common scenarios that arise in practice, and the decision boundaries courts use to evaluate eligibility.

Definition and scope

Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), Congress introduced the means test through 11 U.S.C. § 707(b) as a gatekeeping mechanism against perceived abuse of Chapter 7. A debtor's income status — above-median or below-median — is determined by comparing "current monthly income" (CMI) to the median household income for a household of the same size in the debtor's state of residence.

CMI is a backward-looking figure. It represents the average monthly income from all sources received in the 6-month period ending on the last day of the calendar month before the bankruptcy petition is filed (11 U.S.C. § 101(10A)). Social Security income and certain payments to victims of war crimes are explicitly excluded from CMI by statute.

The U.S. Trustee Program, a component of the Department of Justice, publishes state median income figures that are updated periodically using data from the U.S. Census Bureau. Debtors and courts use the figures in effect on the date of filing. As of the figures published for cases filed on or after November 1, 2024, state median income for a family of four in a high-income state such as Massachusetts exceeds $120,000 annually (U.S. Trustee Program Means Testing Data). A debtor whose annualized CMI — calculated by multiplying monthly CMI by 12 — exceeds that threshold is classified as above-median.

The scope of the means test is limited to individual consumer debtors. It does not apply to businesses, to Chapter 11 cases involving non-consumer debt, or to Chapter 12 and Chapter 13 cases in the same manner it constrains Chapter 7 access. The bankruptcy means test framework is the foundational reference for both above- and below-median analysis; this page focuses exclusively on the above-median tier.

How it works

When a debtor's annualized CMI exceeds the applicable state median, the analysis does not end — it escalates to a detailed expense deduction calculation set out in 11 U.S.C. § 707(b)(2). This second phase of the means test determines whether the debtor has sufficient "monthly disposable income" to fund a Chapter 13 repayment plan, and whether that capacity presumptively renders a Chapter 7 filing abusive.

The mechanical sequence operates in four stages:

1. Compute CMI. Total all income sources — wages, rental income, business revenue, interest, pension distributions — for the 6-month lookback period and divide by 6.
2. Annualize and compare. Multiply CMI by 12 and compare against the applicable U.S. Trustee median. If the result exceeds the median, proceed to the expense deduction phase.
3. Apply allowed deductions. Subtract standardized expense allowances using Internal Revenue Service (IRS) National and Local Standards for food, clothing, housing, transportation, and health care; actual monthly amounts for certain secured debt payments; priority debt payments; and permitted administrative expenses. The IRS National Standards are published and updated by the IRS at irs.gov/businesses/small-businesses-self-employed/national-standards-food-clothing-and-other-items.
4. Calculate monthly disposable income and test the threshold. If remaining monthly disposable income multiplied by 60 equals or exceeds $10,000 (or a lower threshold equal to 25% of the debtor's nonpriority unsecured claims if that amount is less than $10,000), a presumption of abuse arises under § 707(b)(2).

A presumption of abuse does not automatically dismiss the case. The debtor may rebut the presumption by demonstrating "special circumstances" — such as serious medical condition costs or a call to active duty — that justify additional expense deductions or income adjustments (11 U.S.C. § 707(b)(2)(B)).

For above-median debtors who proceed to Chapter 13 bankruptcy, the means test serves a different function: it sets the minimum plan length. An above-median debtor must commit to a 60-month plan (5 years), compared to the 36-month minimum applicable to below-median debtors.

Common scenarios

Three recurring patterns appear in above-median means test practice:

Scenario 1 — High gross income, high secured debt. A debtor earning $95,000 annually carries substantial mortgage and vehicle loan obligations. After applying IRS Local Standards for housing and transportation plus actual secured payment deductions, monthly disposable income may drop below the statutory threshold, avoiding a presumption of abuse. The homestead exemption and secured debt structure are central to this analysis.

Scenario 2 — Temporarily elevated CMI. A debtor who received a large bonus, severance package, or one-time commission 3 months before filing will have that amount averaged into the 6-month CMI calculation even if current income has dropped substantially. The backward-looking nature of CMI frequently produces above-median classification for debtors whose ongoing income is materially lower. Courts have consistently declined to substitute actual current income for the statutory CMI formula absent a specific statutory exception.

Scenario 3 — Self-employed debtors with high gross revenue. Sole proprietors often report gross business receipts as income before business expenses. A contractor grossing $200,000 annually but netting $60,000 after legitimate operating costs will nonetheless show an elevated CMI, because the statutory formula does not permit deduction of business expenses at the CMI computation stage — those expenses enter the analysis only at the allowed-deductions phase, and only to the extent they fit permitted IRS categories.

The U.S. Trustee Program oversight role is directly relevant in all three scenarios: the U.S. Trustee reviews filed means test forms and holds authority to file motions to dismiss or convert based on presumptive abuse findings.

Decision boundaries

Courts and practitioners evaluate above-median means test outcomes along three primary axes:

Presumption triggered vs. not triggered. The line between a presumption of abuse and a clean means test result turns entirely on whether monthly disposable income — after all permitted deductions — meets or exceeds the § 707(b)(2) thresholds. Because IRS Local Standards vary by county, debtors in high-cost metropolitan areas may qualify for higher housing and transportation deductions than debtors in rural districts, producing divergent outcomes at similar income levels.

Special circumstances rebuttal. When a presumption arises, the debtor must itemize special circumstances with the specificity required under § 707(b)(2)(B): each item must include a detailed explanation, documentation, and an attestation under penalty of perjury. Generalized financial hardship does not meet the statutory standard. Courts have found that documented, ongoing medical expenses not captured in IRS health care allowances qualify; voluntary retirement contributions generally do not.

Chapter 7 vs. Chapter 13 election. Above-median debtors who cannot rebut a presumption of abuse face a constrained binary: dismiss the Chapter 7 case, or convert to Chapter 13 and commit to a 60-month plan. The confirmation requirements for a Chapter 13 plan, including the "best efforts" and "best interests" tests, then govern whether the plan will succeed. These requirements are addressed in detail at bankruptcy plan confirmation requirements.

A meaningful contrast exists between above-median debtors in Chapter 7 and those in Chapter 13. In Chapter 7, the means test operates as a gatekeeper: failure to pass can eliminate access to discharge entirely. In Chapter 13, the means test operates as a plan-duration determinant and a floor on projected disposable income that must flow to unsecured creditors — it does not prevent filing, but it shapes the plan's minimum obligations. The discharge of debt in bankruptcy consequences differ correspondingly: Chapter 7 discharge is broader and faster but conditionally available; Chapter 13 discharge arrives after plan completion and covers a slightly different category of obligations.

The BAPCPA reforms that created this framework reflected Congress's determination that above-median earners should bear a higher evidentiary burden before accessing liquidation relief — a policy balance that federal courts have uniformly upheld when reviewing constitutional challenges under the bankruptcy clause.

References

• 11 U.S.C. § 707(b) — Dismissal of Chapter 7 Case (Legal Information Institute, Cornell)
• 11 U.S.C. § 101(10A) — Definition of Current Monthly Income (Legal Information Institute, Cornell)
• U.S. Trustee Program — Means Testing Data and State Median Income Figures (U.S. Department of Justice)
• [