Alabama Bankruptcy Means Test: Income, Expenses, and Presumption

The Alabama bankruptcy means test decides whether you can file Chapter 7 to wipe out your debts or whether your income is high enough that you’ll be steered into a Chapter 13 repayment plan instead. You pass automatically if your household income sits below Alabama’s median for your family size. If it’s higher, you move to a second calculation that subtracts allowed expenses and secured debt payments to see how much you could realistically pay creditors over five years.¹

The test works the same way in all three of Alabama’s federal bankruptcy districts. Congress built it into the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act to keep higher-income filers from using Chapter 7 when they could afford partial repayment.²

Step One: Alabama’s Median Income Comparison

The U.S. Trustee Program publishes median family income figures for each state, drawn from Census Bureau data and updated periodically. For cases filed on or after April 1, 2026, Alabama’s annual median income limits are:³

1 person: $64,321
2 people: $77,451
3 people: $92,698
4 people: $106,740
Each additional person: add $11,100

These are gross income figures, not take-home pay. The court looks at your average monthly gross income from all sources over the six full calendar months before you file, then annualizes it. A family of four earning $105,000 would fall below the median and pass this step without any further calculation. A single filer earning $70,000 would exceed the single-person threshold and have to work through the expense side of the test.

The six-month lookback matters. A temporary spike in earnings, such as a bonus or short-term contract work, can push an otherwise eligible filer over the line. Waiting a few months before filing can change the arithmetic enough to pass.

What Counts as Income

Current monthly income under the Bankruptcy Code is the average of everything you received from all sources during the six months before filing, whether or not it’s taxable.⁴ That includes wages, self-employment earnings, rental income, pension payments, and regular financial contributions from anyone helping with your household expenses, even if that person isn’t filing with you.

Social Security benefits are the major exclusion. Payments received under the Social Security Act do not count toward current monthly income for means test purposes.⁴ If Social Security is your primary income, you’ll likely clear the means test easily. It still shows up on Schedule I of your petition, which tracks your current monthly budget, so a trustee who sees significant leftover income there could still raise concerns about your ability to repay debts.

Marital Adjustment When Only One Spouse Files

When one spouse files alone, the non-filing spouse’s income gets included in the household total for the median comparison. That can push a filer over the threshold even when the non-filing spouse’s earnings go toward their own separate obligations. The marital adjustment on the means test form lets you deduct the portion of your spouse’s income that pays their individual expenses rather than shared household costs. Common examples are the non-filing spouse’s own student loan payments, credit card debt, or child support obligations from a prior relationship. You’ll need bank statements or payment records to back up these deductions.

Step Two: The Expense Calculation

If your income exceeds the Alabama median, the second step subtracts a mix of standardized allowances and actual costs from your monthly income to figure out what you genuinely have left for creditors.

IRS Living Expense Standards

The IRS publishes National Standards for food, clothing, personal care, and out-of-pocket healthcare. These are fixed amounts based on household size that you claim without needing to prove what you actually spend.⁵ Housing, utilities, and transportation costs use Local Standards that vary by county and region. The U.S. Trustee Program posts the specific local figures that apply to Alabama filers by area.¹

Secured Debt Payments

Monthly payments on secured debts like mortgages and car loans are deductible, but you don’t just plug in your current payment. You add up everything contractually due to each secured creditor over the 60 months after filing, then divide by 60 to get the average monthly payment.⁶ If you’re behind on a mortgage or car loan, you can also include the amount needed to cure the arrearage, again divided by 60. Past-due priority debts like back taxes and child support arrears work the same way.

Other Deductible Costs

Several additional categories reduce your disposable income:

Court-ordered child support and alimony payments, fully deductible.
Income taxes, self-employment taxes, and mandatory payroll deductions like Social Security and Medicare.
Term life insurance premiums and health insurance costs beyond what the IRS standards already cover.
Education expenses for a dependent child with a documented disability.
Charitable contributions up to 15% of your gross income, if you have an established pattern of giving to a religious organization or charity.
Mandatory retirement contributions required by your employer, along with health savings account contributions and union dues.

The Presumption of Abuse Thresholds

After subtracting all allowed deductions from your current monthly income, you multiply the remaining amount by 60. That five-year projection decides whether the court presumes your Chapter 7 filing is abusive.⁷

$17,150 or more: abuse is presumed regardless of how much unsecured debt you carry. You fail the means test unless you can rebut the presumption.
Less than $10,275: no presumption of abuse. You pass and can proceed with Chapter 7.
Between $10,275 and $17,150: abuse is presumed only if your projected disposable income equals or exceeds 25% of your total nonpriority unsecured debt.⁸

The Judicial Conference of the United States adjusts these dollar thresholds periodically, so confirm the current figures with the U.S. Trustee Program before filing. The middle tier is where the arithmetic gets case-specific. Someone with $80,000 in unsecured debt and $15,000 in projected disposable income would not trigger the presumption, because 25% of $80,000 is $20,000. Someone with the same disposable income but only $40,000 in unsecured debt would trigger it, because 25% of $40,000 is $10,000.

Who Skips the Means Test Entirely

Federal law carves out complete exemptions for a few groups:

Disabled veterans whose debts were incurred primarily during active duty or homeland defense activity. The court cannot dismiss or convert their case based on any form of means testing.⁷
National Guard and Reserve members called to active duty or homeland defense for at least 90 days after September 11, 2001. The exemption lasts during the service period and for 540 days after release.⁷
Filers whose debts are primarily non-consumer. If more than half your total debt comes from business obligations, tax liabilities, or other non-consumer sources, you skip the means test entirely.⁷

The disabled veteran exemption catches people out. It only protects debts that arose during the qualifying service period. A veteran with a service-connected disability rating who ran up credit card debt years after leaving active duty wouldn’t qualify.

Rebutting the Presumption

Triggering the presumption of abuse doesn’t automatically end your case. You can rebut it by showing “special circumstances” that justify extra expenses or income adjustments beyond what the standard means test allows. The statute specifically names a serious medical condition and a call to active military duty as examples, but those aren’t the only possibilities.⁷

To succeed, you have to itemize each additional expense or adjustment, provide documentation, and give a detailed written explanation of why the circumstances make the expense necessary and unavoidable. All of it is sworn under oath. The bar is high. Vague claims about financial hardship won’t move the needle. You need something concrete and unexpected that the standard deduction categories don’t account for, and even then, the adjusted numbers still have to bring your projected disposable income below the statutory thresholds.

If You Fail the Means Test

Failing doesn’t lock you out of bankruptcy relief. You have a few options.

You can convert the case to Chapter 13 once as a matter of right, without needing court approval, as long as the conversion is in good faith. There’s no court fee for the conversion. You’ll propose a repayment plan distributing your disposable income to creditors over three to five years.⁹

If you already know your income exceeds the median and you have regular earnings, filing Chapter 13 from the start avoids the Chapter 7 means test issue. Chapter 13 has its own version of the calculation on Form 122C, but it sets the length of your repayment plan rather than whether you can file at all.

Waiting is also on the table. Because the test uses your average income over the six months before filing, a temporary earnings bump can be allowed to roll off the lookback window before you file.

One caution on conversion: the court can refuse to convert to Chapter 13 if your income isn’t steady enough to sustain a plan. A trustee who sees irregular earnings or a history of missed payments may argue Chapter 13 isn’t viable either, which can leave dismissal as the only outcome.

1
United States Department of Justice. Means Testing
2
U.S. Government Publishing Office. Public Law 109-8 – Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
3
U.S. Trustee Program. Census Bureau Median Family Income By Family Size
4
Office of the Law Revision Counsel. 11 USC 101 – Definitions
5
Internal Revenue Service. Collection Financial Standards
6
United States Courts. Official Form 122A-2 Chapter 7 Means Test Calculation
7
Office of the Law Revision Counsel. 11 USC 707 – Dismissal of a Case or Conversion
8
United States Courts. Chapter 7 – Bankruptcy Basics
9
United States Courts. Chapter 13 – Bankruptcy Basics