What is the means test in Chapter 13?
In Chapter 13, the means test is the statutory formula used to calculate a debtor’s current monthly income and disposable income, which in turn determines both the applicable commitment period and how much the debtor must devote to unsecured creditors under a plan.[1][2][3]
What the means test does
For Chapter 13 confirmation, the Bankruptcy Code requires that, if a trustee or unsecured creditor objects, the plan either pays unsecured claims in full or commits all of the debtor’s projected disposable income to the plan during the applicable commitment period.[1] The means test is the mechanism Congress used to measure that disposable income, especially for above-median-income debtors.[2][3]
Core idea: it is a standardized income-and-expense calculation designed to determine how much money the debtor can realistically pay to creditors through the Chapter 13 plan.[1][2]
Statutory framework
| Component | Statutory source | Function |
|---|---|---|
| Current monthly income | 11 U.S.C. § 101(10A) | Average monthly income over the 6-month look-back period[5][6] |
| Disposable income | 11 U.S.C. § 1325(b)(2) | Current monthly income minus allowed deductions[4][5] |
| Above-median expense deductions | 11 U.S.C. § 1325(b)(3) and 11 U.S.C. § 707(b)(2) | Uses standardized IRS-based expense categories for many debtors[4][8] |
| Applicable commitment period | 11 U.S.C. § 1325(b)(4) | Usually 3 years for below-median debtors and 5 years for above-median debtors[4][6] |
How it works in practice
1. Calculate current monthly income
The debtor averages income from all sources received during the six months before filing.[5][6]
2. Subtract allowed expenses
Allowed deductions include amounts reasonably necessary for maintenance and support, certain charitable contributions, and, for business debtors, necessary operating expenses.[4] For above-median debtors, most expense deductions are determined under the standardized expense framework of 11 U.S.C. § 707(b)(2).[4][8]
3. Determine disposable income and plan length
If the debtor’s annualized current monthly income is above the state median, the plan generally must run five years unless unsecured claims are paid in full sooner.[4][6] If below median, the applicable commitment period is generally three years.[4][6]
Supreme Court guidance
The Supreme Court has held that the Chapter 13 calculation is not purely mechanical in every case. In Hamilton v. Lanning, 560 U.S. 505 (2010), the Court held that bankruptcy courts may account for changes in income or expenses that are known or virtually certain at confirmation when calculating projected disposable income.[5] And in Ransom v. FIA Card Servs., N.A., 562 U.S. 61 (2011), the Court held that a debtor may not claim an expense deduction for a car payment if the debtor does not actually incur that expense.[7]
Bottom line
The Chapter 13 means test is a statutory budgeting formula that determines a debtor’s income available to pay creditors, especially unsecured creditors, and helps set the required plan payment and duration.[1][2][4]