11 U.S.C. Section 707(b) -- Means Test and Abuse

What Is Section 707(b)?

Section 707(b) of Title 11 of the United States Code (Dismissal of a Case -- Abuse) is a foundational provision of the Bankruptcy Code. It provides the specific framework for determining when a Chapter 7 filing constitutes abuse, including the mechanical means test and the totality of circumstances analysis. This subsection was added by BAPCPA in 2005 and transformed Chapter 7 eligibility.

Key Provisions of Section 707(b)

The means test under 707(b)(2) follows a mechanical calculation:

1. Step 1 -- Current Monthly Income (CMI): Average your gross income over the 6 full calendar months before filing. Include all sources: wages, business income, pensions, Social Security (for means test purposes), rental income, and contributions from others.
2. Step 2 -- Compare to State Median: If your annualized CMI is below your state's median income for your household size, you pass. No further means test analysis is required.
3. Step 3 -- Deductions: If above median, subtract allowed deductions: IRS National Standards (food, clothing, personal care), IRS Local Standards (housing, transportation), actual secured debt payments, priority claims, and certain other expenses.
4. Step 4 -- Disposable Income Test: Multiply remaining monthly disposable income by 60. If the result is above $15,150, abuse is presumed. If between $9,075 and $15,150, abuse is presumed only if you could pay 25% or more of unsecured claims. Below $9,075, no presumption.

How This Affects You

Understanding 707(b) is critical for pre-filing planning:

• The 6-month lookback: If you received a bonus, severance, or had unusually high income recently, those months count. Consider whether delaying your filing until high-income months fall outside the window makes sense.
• Household size matters: More dependents means a higher median income threshold. Accurately counting your household size (which is not defined in the Code and varies by district) can determine your result.
• Marital deduction: If married and filing individually, you can deduct your non-filing spouse's share of expenses even though their income is included in CMI.
• Special circumstances (707(b)(2)(B)): Even if the numbers create a presumption of abuse, you can rebut it by documenting special circumstances -- serious illness, disability, active military duty, or other factors that demonstrate the expenses or income adjustments are necessary.

Related Bankruptcy Code Sections

Section 707(b) works in conjunction with several other provisions of the Bankruptcy Code:

• Section 707(a) -- General dismissal for cause
• Section 109 -- Who may file
• Means Test Calculator -- Interactive means test tool
• Section 1325 -- Chapter 13 confirmation (if you convert)

Understanding how these sections interact is critical for anyone navigating the bankruptcy process, whether as a debtor, creditor, or attorney.