Chapter 7 Worksheet: Means Test Calculation

Step One: Is the debtor an individual whose debts are primarily consumer debts (e.g., not tax or tort claims)?
   If yes, proceed with the Means Test, along with Schedules I and J.
   If no, the Means Test does not apply - only complete Schedules I and J.  Stop here.

Step Two: Is the debtor's income at or below the MFI?
   If so, the Means Test does not apply - only complete Schedules I and J.  Stop here.

Step Three: Enter the Net Monthly Income from the Statement of Current Monthly Income and Statement of Net Monthly Income

     Multiply Net Monthly Income by 60

     The answer equals [A]

Step Four: If [A] is at least $10,000, the debtor fails the Means Test.  Stop here.

    If [A] is less than $6,000, the debtor passes the Means Test.  Stop here.

    If [A] is at least $6,000, but less than $10,000, continue.

Step Five: Compare non-priority unsecured claims: $____   X 25% = $       [B] with $6,000.

    The larger of [B] and $6,000 is:_____ $______[C]

Step Six: If [A] is less than [C], the debtor passes the Means Test.  Stop here.

   If [A] is equal to or greater than [C], the debtor fails the Means Test.  A debtor who is subject to the Means          Test, fails it, and still files a Chapter 7 will be presumed to have filed an abusive case.

   This presumption of abuse can only be rebutted by applying "Special Circumstances" adjustments to income and expenses that result in [A] becoming less than [C].

Monthly Expenses

The first clause that is used in factoring the means test deals with the debtor's monthly expenses.  The monthly expenses for the person wishing to file bankruptcy are determined by the person's applicable, or relevant, monthly expense amounts specified under the National Standards and Local Standards.  The bankruptcy filer's actual monthly expenses for the categories specified as Other Necessary Expenses which are issued by the Internal Revenue Service for the area where they live. 

The expenses will include reasonably necessary health insurance, disability insurance, and health savings account expenses for the person wishing to file.  These monthly expenses will not include any payments for or toward debt.  In addition to this, the monthly expenses will include the debtor's reasonably necessary expenses incurred to maintain the safety of the debtor and the family of the debtor from family violance.  The expenses used to maintain the safety of themselves and their family will be kept confidential by the court. 

Also, if it is demonstrated that it is reasonable and necessary, the debtor's monthly expenses may also include an additional allowance for food and clothing of up to 5 percent of the food and clothing categories as defined by the National Standards issued by the IRS.

The monthly expenses may include the continuation of actual expenses paid by the debtor that are reasonable and necessary for the care and support of an elderly, chronically ill, or diabled household member or member of the debtor's immediate family (including parents, grandparents, siblings, children, grandchildren of the debtor, the dependents of the debtor, and the spouse of the debtor in a joint case who is not already a dependant) and who is unable to pay for such reasonable and necessary expenses.

If you are eligible to file for a chapter 13 bankruptcy, your monthly expenses may include the actual administrative expenses of administering a chapter 13 plan for the district in which you live, up to an amount of 10 percent of the projected plan payments, as determined under the schedules issued to you by the Executive Office for the United States Trustees.

Your monthly expenses may also include the actual expenses for each dependent child less than 18 years of age, not to exceed $1,500 per year per child, to attend a private or public elementary or secondary school if the debtor provides documentation of the expenses and a detailed explanation of why these expenses are reasonable and necessary, and why the expenses are not already accounted for in the National Standards, Local Standards, or Other Necessary Expenses listed earlier.

Your expenses may also include an allowance for housing and utilities, in excess of the allowance specified by the Local Standards for housing and utilities issued by the IRS, based on the actual expenses for home energy costs if the person wishing to file bankruptcy provides documentation of such actual expenses and demonstrates that such actual expenses are reasonable and necessary.

The debtor's average monthly payments on account of secured debts will be calculated as the sum of the total of all the amounts scheduled as due because of a contract to secured creditors in each month of the 60 months following the date of petition and any additional payments to secured creditors necessary for the debtor, in filing a plan under chapter 13, to maintain possession of the debtor's primary residence, motor vehicle, or other property necessary for the support of the debtor and the debtor's dependants, that serves as collateral for secured debts, all of which are divided by 60.  The debtor's expenses for payments of all priority claims (including priority child support and alimony claims) will be calculated as the total amount of debts entitled to priority, divided by 60.

The presumption of abuse may be rebutted if the debtor can demonstrate special circumstances, such as a serious medical conditional or a call or order to active duty in the Armed Forces, to the extent such special circumstances that justify additional expenses or adjustments of current monthly income for which there is no reasonable alternative.

In order for the debtor to establish special circumstances, they will be required to itemize each additional expense or adjustment of income and to provide documentation of such expense or adjustment of income, and a detailed explanation of the special circumstances that make such expenses or adjustments to income necessary and reasonable.  You will also be required to attest under oath the accuracy of any information provided to demonstrate that additional expenses or adjustments to income are required.

Subtracting the Monthly Allowed Expenses from the CMI in Chapter 7:

The new Code allows the deduction of certain expenses from the pre-petition Current Monthly Income.  Monthly allowed expenses are calculated based upon the petition date and the needs of the debtor and debtor's dependents.  Monthly allowed expenses exclude payments for debts. [707(b)(2)(A)(ii)]

The following are the IRS National Standards.  You will select applicable amounts from the IRS table based upon current income and do include the types of income excepted under the Bankruptcy Code, such as Social Security. 

 - Food (home and away meals)
 - Housekeeping supplies (laundry and cleaning supplies, cleaning and toilet tissue, paper towels, napkins, lawn and garden supplies, postage and stationery, miscellaneous)
 - Apparel and services (shoes, clothing, laundry and dry cleaning, shoe repair)
 - Personal care products and services (hair care products, haircuts and beautician services, oral hygiene products and articles, shaving needs, cosmetics, perfume, bath preparations, deodorants, feminine hygiene products, electric personal care appliances, personal care services, repair of personal care appliances)
 - Miscellaneous

The following are the IRS Local Standards.

 - Housing and utilities (Utilities include: gas, electricity, water, fuel, oil, bottled gas, trash and garbage collection, wood and other fuels, septic cleaning and telephone).  Housing includes: mortgage or rent, property taxes, interest, parking, necessary maintenance and repair, homeowner's or renter's insurance, homeowner dues and condominium fees - usually for place of residence)
 - Transportation (Includes certain ownership costs as explained below and operating costs includes public transportation costs, vehicle insurance, maintenance, fuel, state and local registration, required inspection, parking fees, tolls, driver's license, public transportation)
 - Conditional expenses

The following are the IRS Other Necessary Expenses for health and welfare of debtor and family or production of income.

 - accounting and legal fees
 - necessary charitable contributions
 - childcare
 - court-ordered payments (e.g., support, Chapter 13 attorney's fees)
 - dependent care for elderly, invalid, or handicapped
 - necessary education
 - health care - not elective
 - involuntary deductions (union dues, uniforms, work shoes, etc.) - also involuntary 401(k) loan repayments and retirement contributions
 - life insurance - not usually whole life
 - taxes (current federal income tax, FICA, Medicare, state and local taxes withheld from income, personal property (e.g., vehicle) tax)
 - optional telephone and telephone services
 - student loans
 - internet service

The debtor's charitable contributions [cash or financial instruments - 548(d)(3)(B)] may not be considered by the court in determining whether to dismiss the case. [707(b)(1)]

"Qualified religious or charitable entity or organization," as defined by IRC 170(c)(1) or (2) [548(d)(3) and (4)]:
(c)(1): federal, state or local government for public purposes
(c)(2): corporation, trust, community chest, fund, or foundation organized for religious, charitable, scientific, literary, or educational purposes, or to foster national or international amateur sports competition..., or for prevention of cruelty to children or animals; which net earnings do not benefit any individual; and which is not disqualified for 501(c)(3) tax exemption due to lobbying

Reasonably necessary health insurance, disability insurance, health savings accounts [707(b)(2)(A)(ii)]

Expenses related to Family Violence Prevention and Services Act (Sec. 309), which shall be confidential [707(b)(2)(A)(ii)]

If reasonably necessary, additional 5% for food and clothing standard amounts provided in the IRS National Standards (e.g., if in area with higher than average cost of living)

continuation of actual expenses paid by the debtor for care for elderly, chronically ill, disabled family member, household member, or dependent who is unable to pay for those expenses

If debtor is eligible for Chapter 14, hypothetical actual administrative expenses for Chapter 13 up to 10%, as determined by the United States Trustee

Actual school expenses for minor up to $1,500 annually per child with justification

Supplemental deduction for home energy costs in excess of IRS Local Standards amount, if reasonable and necessary

Average secured debt payment is the sum of:
 - the total payments contractually due in each month within 60 months post-petition; and
 - additional payments due to secured creditors to maintain possession of primary residence, motor vehicle, or other necessary secured propery divided by 60 (curing pre-petition arrears)

Priority claim expenses: total amount of priority debts divided by 60