Chapter 13 The Means Test

While Chapter 13 bankruptcy also makes use of a means test, it is not an eligibility test as it is under Chapter 7, nor is the benefits — such as stopping foreclosure — dependent on passing the means test. Rather, the Chapter 13 means test affects the type and duration of the payment plan under the Chapter 13 bankruptcy. The Chapter 13 means test is based on the household annual gross income. If your gross income is greater than the state median for a household of that size, a 60-month (five-year) payment plan must be used. If your yearly gross income is less than the state median, you may use either a 36-month (three-year) or 60-month payment plan.

Additionally, like the Chapter 7 means test, the Chapter 13 means test also requires that average monthly income be calculated. After calculating the monthly income, your income is again compared to the state median. If your income equals or exceeds the median, the court assumes that you can pay back unsecured creditors. If your average income is below the median, the court assumes that you cannot pay back unsecured creditors.

When you file for Chapter 13, the means test uses the same calculations as for Chapter 7. The Chapter 13 means is based on your current monthly income (CMI). CMI is the average monthly income you received during the previous six-month period. To calculate CMI, you must include your income from nearly all sources, including:

• Wages
• Salary
• Tips
• Interest
• Dividends
• Child support payments
• Unemployment
• State disability payments
• Royalties