A "presumption of abuse" arises under 11 U.S.C. 707(b)(2) when an above-median filer has enough disposable income left, after allowed expenses, to repay a meaningful share of unsecured debt. It can be rebutted only by showing special circumstances, such as a job loss or medical emergency, that cut income or raise necessary expenses. Otherwise the Chapter 7 case is presumed abusive and faces dismissal or conversion to Chapter 13.
Two Tracks: Below-Median and Above-Median
The means test under 11 U.S.C. § 707(b) operates in two stages. The first compares the debtor's current monthly income (CMI), annualized, against the state median income for a household of the debtor's size.
- Below-median debtors pass the means test automatically. The presumption of abuse does not apply, and Chapter 7 is available without further calculation.
- Above-median debtors proceed to the second stage: a detailed disposable-income calculation under § 707(b)(2)(A).
State median income figures are published by the U.S. Trustee Program and updated semi-annually. They vary by state and household size. The numbers used in the calculation are based on the six full calendar months immediately preceding the petition date, not the most recent three months or the most recent year.
Calculating Current Monthly Income
"Current monthly income" is a term of art. It is the average monthly income from all sources received during the six full calendar months preceding the bankruptcy petition. CMI includes wages, salary, tips, bonuses, business income, rental income, child support and alimony received, and certain other categories. It excludes Social Security benefits and a few other specifically-listed categories.
Multiply the monthly average by 12 to annualize, then compare against the state median for the household size. Households of one count differently from households of four; the median for a four-person household in a high-cost state can be 50–70% higher than the one-person median in a low-cost state.
The Disposable-Income Calculation
For above-median debtors, § 707(b)(2)(A) calculates monthly disposable income by subtracting allowed expenses from CMI. The allowed expenses are dictated by:
- The IRS National Standards for food, clothing, household supplies, personal care, and miscellaneous items (table-driven by household size)
- The IRS Local Standards for housing, utilities, and transportation (county-specific table values)
- Actual expenses for certain categories like taxes, mandatory payroll deductions, term life insurance, court-ordered payments, education for special-needs children, childcare, and health-care/disability insurance
- Average monthly payments on secured debts (cars, home) over the next 60 months
- Priority claims (child support, alimony, taxes) divided by 60
The result is a "Form 122A-2" calculation that produces a single monthly disposable-income figure. Multiply by 60 to project the disposable income over a hypothetical 5-year Chapter 13 plan.
Practical note. The IRS Local Standards rarely match a debtor's actual housing or transportation costs. Above-median debtors who actually pay more than the IRS standard for housing get only the IRS-standard amount as their allowed deduction; the excess does not count.
The Two Thresholds
Section 707(b)(2)(A)(i) sets two thresholds for the 60-month projected disposable income:
- Below $9,075: presumption of abuse does not arise. Chapter 7 is available.
- Above $15,150: presumption of abuse arises automatically. Chapter 7 is presumptively unavailable.
- Between $9,075 and $15,150: the presumption arises only if the projected disposable income is sufficient to pay 25% or more of the debtor's nonpriority unsecured debt over 60 months.
(These dollar thresholds are statutorily indexed and adjusted periodically. Check the U.S. Trustee Program's current figures at filing.)
Special Circumstances Rebuttal
Section 707(b)(2)(B) allows an above-median debtor whose calculation triggers the presumption to rebut it by demonstrating "special circumstances" that justify additional expense allowances or income adjustments. Special circumstances must be:
- Specifically identified and documented
- Reasonable and necessary
- Demonstrated by attached documentation
- Sufficient, when accounted for, to bring projected disposable income below the threshold
Examples that courts have accepted: serious medical conditions of the debtor or dependents, active military service, recent job loss, ongoing care for a disabled family member. Examples that courts have rejected: high-end private school tuition, ordinary discretionary spending, lifestyle preservation arguments.
What Happens When the Presumption Arises
If the presumption of abuse arises and is not rebutted, the U.S. Trustee files a motion to dismiss under § 707(b)(1) or to convert to Chapter 13 under § 706(c). The court then decides whether to dismiss, convert, or allow the case to continue.
In practice, debtors faced with a presumption either rebut it with special-circumstances evidence, voluntarily convert to Chapter 13, or accept dismissal and revisit options after circumstances change.
Below-Median and Totality-of-Circumstances
Even below-median debtors are not automatically immune from abuse review. Section 707(b)(3) authorizes the court, on motion of the U.S. Trustee or trustee, to consider the "totality of the circumstances" in determining whether granting Chapter 7 relief would be an abuse. This is a separate inquiry from the means-test calculation and applies to debtors of any income level.
Totality-of-circumstances review focuses on factors like substantial unsecured debt incurred shortly before filing, sudden disposable income from a stable job, ability to fund a Chapter 13 plan despite calculation results, and bad-faith filing indicators.
Counsel's Role
The means-test calculation is mechanically straightforward but factually unforgiving. Income, expense categorization, household-size determination, and timing all matter. Errors typically favor the calculation result that is worse for the debtor, and the U.S. Trustee or panel trustee will catch them. Working with a competent debtor's attorney through the calculation, particularly for above-median cases, is essentially required to avoid foreseeable problems.
Further Reading
- 11 U.S.C. § 707 — Dismissal of a Case or Conversion
- U.S. Trustee Means Testing Information
- Section 707(b) Means Test Abuse Standards
- How to Convert Chapter 13 to Chapter 7
This page provides educational information only. Means-test calculations involve specific table values that change over time. Consult a licensed bankruptcy attorney about your specific situation.