The phone won’t stop ringing. Collection letters pile up on the kitchen table. You’ve thought about bankruptcy, but then you heard something about a “means test” that might keep you from filing Chapter 7. Does your income automatically disqualify you? What exactly is this test, and how does it work in Missouri?
The means test doesn’t have to be a mystery. Let’s break down what it is, how it works, and whether you can pass it.
The Purpose Behind the Means Test
Congress overhauled bankruptcy law with the Bankruptcy Abuse Prevention and Consumer Protection Act. Before this reform, almost anyone could file Chapter 7 bankruptcy and wipe out their debts. Lawmakers felt some people who could afford to repay their debts were abusing the system. The reform aimed to fix this problem.
The means test works like a financial screening tool. It separates people who genuinely cannot pay their debts from those who have the means to repay them. If you have enough income left after necessary expenses, you should file Chapter 13 and repay creditors through a payment plan. The test ensures bankruptcy relief goes to those who truly need it.
How the Missouri Means Test Works
The test happens in two stages, and you only move to the second stage if you don’t pass the first one.
Stage One: Comparing Your Income to the State Median
First, you calculate your Current Monthly Income, or CMI, by looking back at the six full calendar months before you file. Add up everything you received during those six months, then divide by six. For example, if you file bankruptcy on September 15th, you count income from March 1st through August 31st.
The calculation includes almost every dollar coming into your household, including wages, self-employment income, rent from tenants, interest and dividends, pension payments, retirement distributions, unemployment benefits, and money others contribute to household expenses. Social Security retirement benefits don’t count toward your CMI. If you’re filing individually, your spouse’s income still gets included because the law looks at household income, not just the filing person’s earnings.
Once you have your CMI, you compare it to your state’s median income based on household size, which updates twice per year. If your CMI falls below the median for your household size, you automatically pass the means test under 11 U.S.C. § 707(b)(2). You’re done—no second stage needed.
Stage Two: The Expense Calculation
Income above Missouri’s median doesn’t automatically disqualify you. The second part of the means test looks at your monthly expenses to figure out if you truly have money left over to pay creditors.
This calculation subtracts your allowable monthly expenses from your CMI. The result is your monthly disposable income. Bankruptcy law uses a combination of national standards from the IRS, local standards for your area, and certain actual expenses you can prove.
Your allowable expenses fall into several categories.
National standards for basic living expenses cover food, clothing, household supplies, and personal care. The IRS sets fixed amounts based on household size. You don’t need to prove what you actually spend in these categories.
Local housing and utility standards vary by county. If you rent, you generally can’t deduct more than the standard amount. If you have a mortgage, you typically can deduct your full mortgage payment, including principal, interest, property taxes, and insurance.
Transportation expenses include two parts. Operating costs like gas, maintenance, and insurance use national standards. Ownership costs let you deduct actual car loan payments.
Health care costs beyond basic coverage can be deducted, including out-of-pocket expenses not covered by insurance.
Other necessary expenses include things like mandatory payroll deductions, union dues, childcare necessary for employment, term life insurance premiums, court-ordered payments such as child support or alimony, and payments on secured debts for property you plan to keep.
After calculating all these deductions, you multiply your monthly disposable income by 60 months to project what you’d have available over five years.
Then comes the final determination. If your 60-month total is less than $10,275, you pass the means test and can file Chapter 7. If it exceeds $17,150, you fail the test and must use Chapter 13 if you want bankruptcy protection.
What if you fall in between? If your total lands between $10,275 and $17,150, you’ll need to do additional math. Calculate whether that amount would pay at least 25% of your unsecured debts. If yes, you fail. If not, you pass.
Who Doesn’t Have to Take the Means Test?
Not everyone filing Chapter 7 faces this test. Several exemptions exist.
Your debts are primarily business-related rather than consumer debts. Under 11 U.S.C. § 101(8), consumer debts are those incurred for personal, family, or household purposes. Business debts get treated differently and exempt you from means testing.
You’re a disabled veteran whose debt was incurred mainly during active duty or while performing homeland defense activities. This recognizes the unique financial challenges faced by veterans.
You’re a member of the reserves or National Guard who was called to active duty for at least 90 days, and you’re filing either during that duty or within 540 days after it ends.
Your income already falls below Missouri’s median for your household size. In that case, you automatically qualify without completing the full calculation.
Can You Pass With Higher Income?
Many people assume that earning more than Missouri’s median income means automatic disqualification. That’s not true. The expense calculation gives you a real opportunity to qualify even with above-median earnings.
Large families naturally have higher allowable expenses. Someone with four kids will have much different deductions than a single person. Substantial mortgage payments, necessary vehicle loans, ongoing medical treatment, required childcare costs, and mandatory support payments can all work in your favor during the calculation.
A household earning $90,000 annually might easily pass if they have a mortgage, two car payments, health insurance premiums, medical expenses, childcare costs, and student loan payments. The numbers need to be run to know for sure.
The bankruptcy court also has authority under 11 U.S.C. § 707(b)(3) to consider special circumstances. Serious medical conditions, recent job loss, family emergencies, and other factors that justify higher expenses or lower income can influence the outcome, even if the standard calculation doesn’t work in your favor.
What Happens If You Don’t Pass?
Failing the means test doesn’t end your options for debt relief. It simply redirects you toward Chapter 13 bankruptcy instead of Chapter 7.
Chapter 13 lets you keep your property while repaying creditors through a court-approved payment plan lasting three to five years. Below-median income filers usually have three-year plans unless they choose longer. Above-median filers typically face five-year plans.
Chapter 13 offers some advantages that Chapter 7 cannot provide. You can catch up on missed mortgage payments and save your home from foreclosure. You might reduce the principal balance on certain secured debts like car loans through cramdown. You can propose paying only a portion of unsecured debts, with the rest discharged when you complete the plan.
The tradeoff involves commitment. You’ll make monthly payments to a bankruptcy trustee who distributes funds to creditors according to your approved plan. Missing payments can result in dismissal and leave you facing the same financial problems that drove you to file.
Common Mistakes People Make
The means test looks straightforward on paper, but real-life situations create complications. Here are errors that trip people up.
Miscalculating the lookback period. You must use six complete calendar months before filing. Filing on September 15th means your lookback runs from March 1st through August 31st, not simply six months back from September 15th.
Forgetting income sources. That side business, the rent your roommate pays, your spouse’s salary, year-end bonuses, and occasional freelance work all count. Leaving out income can trigger problems later.
Using current income instead of the six-month average. Maybe you lost your job last week and have zero income now. Unfortunately, the calculation looks backward, not forward. You must report what you actually earned during those six months, regardless of today’s situation.
Claiming expenses without proof. Standard expense amounts don’t require documentation, but actual costs do. Keep records of mortgage payments, car loans, insurance premiums, and medical expenses.
Confusing household size with dependents. Your household size generally matches who you could claim on your tax return plus any additional dependents you support. A roommate paying their own way doesn’t count. College kids you’re supporting usually do count.
Does Timing Matter?
Absolutely. The six months before filing can make or break your case.
If you recently lost income or took a pay cut, waiting a few months before filing might help you qualify. Each passing month drops one higher-income month from your calculation and replaces it with a lower-income month.
On the flip side, if you just started a lucrative job after six months of unemployment, filing sooner captures those lean months in your average.
Median income figures also change twice yearly. If you’re borderline, the next update might push you below the threshold.
One caution though. Strategic timing makes sense, but manipulating your situation crosses a line. Quitting your job, reducing hours, or shuffling income solely to pass the means test counts as bad faith. Even if you technically pass, courts can dismiss your case under 11 U.S.C. § 707(b)(3) for abusing the system.
What About Variable Income?
Many Kansas City workers have income that changes month to month. Servers, salespeople on commission, contractors, and seasonal employees all face this reality.
The six-month averaging helps smooth out fluctuations. You add up total income from all sources for each of the six months, sum those monthly totals, then divide by six. This gives you a more representative picture than any single month would show.
Keep detailed records. Bank statements, pay stubs, 1099 forms, and tax returns support your calculations and protect you if questions come up later.
Will the Court Question Your Expenses?
The means test relies heavily on standardized amounts, which limits how much courts can second-guess your numbers. If the IRS says a four-person household can reasonably spend a certain amount on food and clothing, the court typically accepts that.
However, actual expenses that exceed standard amounts may draw scrutiny. An unusually expensive mortgage, high car payments, or large charitable contributions could raise questions.
Courts also look at the overall picture. If your claimed expenses seem inconsistent with your income level or lifestyle, that might trigger additional review. The bankruptcy trustee wants to ensure you’re not gaming the system while actually having the ability to pay.
Key Takeaways
- The means test determines Chapter 7 eligibility by comparing your income and expenses to set standards.
- Your Current Monthly Income reflects six full calendar months before filing, not your current paycheck.
- Missouri’s median income thresholds change twice yearly and vary by household size.
- Income below the state median for your household size automatically qualifies you for Chapter 7.
- Above-median income doesn’t automatically disqualify you if allowable expenses are high enough.
- Social Security retirement income doesn’t count in your income calculation.
- Failing the means test redirects you to Chapter 13 rather than eliminating bankruptcy as an option.
- Strategic timing can help you qualify, but artificial manipulation is prohibited.
- The means test is governed by federal law under 11 U.S.C. § 707(b).
- As of April 1, 2025, disposable income under $10,275 over 60 months passes the test, while amounts over $17,150 fail.
Frequently Asked Questions
Does my spouse’s income count if they’re not filing bankruptcy with me?
Yes, in most cases. The means test examines household income, not just the filing person’s earnings. Your spouse’s income gets included even if they’re not a co-filer. Limited exceptions exist for legally separated spouses or those living apart, but these situations require careful analysis.
What if I just lost my job or my income dropped significantly?
The six-month lookback can work against you in this situation. Even with zero current income, you must average earnings from the previous six complete calendar months. However, waiting to file makes sense if possible. Each passing month replaces one higher-income month with a lower-income month. You can also present evidence of changed circumstances to the court, though this doesn’t change the actual means test calculation.
Can I pass the means test if I own a home with a mortgage?
Absolutely. A mortgage often helps people pass because it represents a substantial allowable expense. You can deduct your actual mortgage payment, including principal, interest, property taxes, and insurance. This differs from rent, which faces stricter limitations. Many homeowners with above-median income still qualify for Chapter 7 due to their mortgage obligation.
How do I know what my household size is?
Your household size generally equals the number of people you could claim as exemptions on your federal tax return, plus any additional dependents you actually support. This typically includes you, your spouse if married and living together, and your dependent children. Adult children living at home whom you support may count. College students away at school usually count if you’re supporting them. Roommates who pay their share of expenses don’t count.
What happens if I make a mistake on my means test?
Honest mistakes can usually be corrected through amendments to your bankruptcy filing. However, intentional misrepresentation of income or expenses constitutes fraud and can result in case dismissal, denial of discharge, or criminal prosecution. If you realize you made an error, notify your attorney immediately so corrections can be filed promptly.
Will my tax refund affect the means test?
Tax refunds received during the six-month lookback count as income and must be included in your CMI calculation. However, if you typically receive large refunds because of withholding, you might consider adjusting your W-4 to reduce withholding. This increases regular paychecks slightly while reducing the lump-sum refund, potentially improving your means test results. Timing matters with this strategy, so plan ahead.
Can I deduct my credit card payments as an expense?
No. Payments on unsecured debts like credit cards, medical bills, and personal loans don’t count as allowable expenses. You’re seeking to discharge these debts through bankruptcy, so the court won’t let you count payments toward them as necessary expenses. However, secured debt payments on property you’re keeping, such as mortgage or car payments, are fully deductible.
Ready to Take the Next Step?
The means test is just one piece of the bankruptcy puzzle, but it’s often the most challenging part to handle alone. Small errors can derail your entire case, and the rules contain numerous exceptions most people don’t know about.
At Roach Bankruptcy Center, LLC, we help Kansas City residents work through the means test and determine whether Chapter 7 makes sense for their situation. We’ll review your income and expenses, calculate your CMI accurately, determine your household size correctly, and complete all necessary forms properly.
Many clients initially assume they can’t qualify after glancing at median income figures. But after we analyze their complete financial picture, they discover Chapter 7 is within reach. High medical costs, large families, necessary vehicle expenses, ongoing support obligations, and other factors often make the difference.
Bankruptcy offers the fresh start you need. Whether you’re facing foreclosure, drowning in medical debt, overwhelmed by credit card bills, or dealing with other financial pressures, solutions exist. The means test might seem like an obstacle, but for people genuinely struggling financially, it’s a hurdle most can clear.
Don’t let confusion about the means test keep you from getting the help you need. Contact Roach Bankruptcy Center, LLC today to schedule a free initial consultation. We’ll sit down with you, review your specific circumstances, and help you determine the best path forward. Your financial future doesn’t have to be defined by today’s struggles.
