What Is The Means Test In The Bankruptcy Process?

Robert J. Adams and Associates July 22, 2020

The Means Test is a calculation to determine if a Consumer Debtor(s) can make meaningful payments to unsecured creditors. The test is required for individuals and but not for corporations and the like nor it does not apply to individuals if the majority of debts are what is considered non-Consumer debts.

Essentially is a test to see if a person(s) is barred from filing a Chapter 7.

The test consisted at two parts.

First what are the gross income of person(s) and all income in the household? If the income is less than certain amounts the individual(s) are not barred from a Chapter 7 nor a low dividend to general unsecured creditors in a Chapter 13 case.

Currently the limits in Illinois can be found at

As a side note, neither Social Security Retirement nor Social Security Disability income is included.

As can be seen if the annual income (based on the last 6 months) is less than what is listed the test is over.

If the income exceeds the limits then the process continues.

There multiple deductions that applies. Some of them include federal and state income taxes; social security and Medicare deductions; mandatory retirement plans, union dues and uniforms. Likewise monthly Child Support payments are deducted as well charitable contributions. There are other deductions.

Secured debts and non-dischargeable taxes are amortized over 5 years (with interest) that can be deducted.

For a fuller itemization please go to

Experienced lawyers spend a great deal of time to minimize or eliminate the effects of the Means Test. I know the lawyers in our firm do so.

Does The Means Test Take Place For All Types Of Bankruptcies Or Just Chapter 7?The means test is for Chapter 7 and Chapter 13 bankruptcies. It is generally not for a Chapter 11 bankruptcy, which is for businesses.


The income limits increase for each child living with you (including children away at school). It also includes other dependents living with you, such as grandchildren, adopted children, parents, and even nephews and nieces.


Allowable expenses include mortgage or real estate tax expenses, residential, food, utilities, income taxes, and property taxes. If the debtors are giving to charities, then certain expenses for this are possible. There are deductions allowable for child support payments, transportation, health insurance, and health expenses. Car payments are also an allowable expense, and non-filing spouse’s debt, if there is a single filer. An example of this would be if one spouse in a married couple was filing for bankruptcy, but the other spouse has a car payment to make.


To pass the means test is only one part of it. What we would do then is to create a budget and insert your income and your expenses, to make sure you have no disposable income at the end of the day to repay your creditors. The law says if you have $100 disposable income after the means test, then you have to file a Chapter 13. Our job is to make sure that we include all household expenses, so that would be the second priority. If you pass the means test, and then you pass your income and your budget, we determine whether there are any assets that are not protected under exemption law. It is possible that you could pass the means test and you could pass the income or budget test, but maybe you own something that has value in it.

If this were your situation, we would have to determine what would happen with that asset. This is mainly for houses. For a single person, Illinois has an exemption of $15,000.

If there is more than $15,000 after deducting all mortgage balances and owed and accrued real estate taxes we have a developed a liquidation analysis spread sheet. Showing what would happened in a hypothetical Chapter 7 liquidation. We use multiple deductions such as real estate commissions, cost of title insurance, unpaid water bills, State of Illinois transfer taxes, seller’s lawyers’ fees, trustee’s fees, etc. Frequently we have been able to demonstrate that an individual with equity in excess of $15,000 can still file a Chapter 7 or if filing a Chapter 13 only pays a small dividend to unsecured creditors.

Different people have different things. I have a gentleman who owns 7 pieces of property, and is walking away from every single one of those properties. It’s on a case-by-case basis.

One thing that is exempt is that people really need to know is retirement accounts. IRAs, 401(k)s, qualified pension plans: anything that falls under the IRS’ definition of retirement accounts, is exempt by law. That could be significant, especially if you have somebody maybe in their 50s or 60s that has worked at some company, and has a really big retirement account. Their creditors, and the trustee of the bankruptcy, can’t touch that. Besides their house, many times the most valuable thing a person owns is their retirement.


If you don’t pass the means test, we would look at filing a Chapter 13 bankruptcy.

Skillful lawyers understand the Means Test and can frequently demonstrate that a Chapter 13 plan can pay a very small dividend.

For more information on Means Test In The Bankruptcy Process, a Complimentary initial consultation is your next best step. Get the information and legal answers you are seeking by calling today.