It compares that income to the median household income in Debtor’s county for a household of a similar size. If the income is below the median income, the Debtor is presumptively eligible to file a Chapter 7. If the income is above the median, it requires additional analysis to determine if a Debtor is eligible to file Chapter 7. If the Debtor’s income is over the median, he may still be able to file Chapter 7 depending on his expenses. 

The IRS has developed certain allowances for housing, transportation, medical expenses etc. which may be deducted from the Debtor’s income. There are also additional IRS allowances based on taxes, insurance, child care, telecommunications needs, charitable contribution etc. In addition, the Debtor may also subtract payments for secured loans such as mortgages, vehicles and other secured property. Priority debts such as child support and alimony may also be deducted from the Debtors income. A Debtor fails the means test, if after deducting all of the allowable expenses from their average current income, he has approximately $100.00 or more available to pay creditors. Failing the means test creates a presumption that the case should not be eligible for Chapter 7. 

If the Debtor fails the means test, the U. S. Trustee will generally bring a motion to dismiss the case. The motion can be defended against by showing special circumstances. Special circumstances can be a reduction in income or job loss. Other special circumstances could be a long commute, high medical bills, student loan payments etc.

Even if a Debtor passes the means test, the U.S. Trustee may file a motion to dismiss the case. The U.S. Trustee reviews the Debtors current income and expenses listed on the bankruptcy schedules to determine if the Debtor has available income to pay creditors. For example if the Debtor passed the means test because he was out of work during the period used to calculate his income and now has returned to work with a substantial income and an ability to repay creditors, the Trustee will file a motion to dismiss. In fact most of the motions brought by the U.S. Trustee are the result from this type of case.