Common Mistakes People Make When Completing the Bankruptcy Means Test

The Bankruptcy Means Test is a central part of filing for consumer bankruptcy, and it plays a major role in determining whether you qualify for Chapter 7 or must pursue a Chapter 13 repayment plan. Because the test applies federal rules to California households, where living costs, housing expenses, and childcare needs often exceed national averages, small mistakes can lead to inaccurate results.

Understanding the most common issues helps you avoid delays and ensures your filing reflects your actual financial situation. If you want guidance tailored to your household, a Los Angeles bankruptcy lawyer can provide clarity at every step.

Misreporting or Misunderstanding Your Household Income

One of the most frequent errors involves reporting household income. The Means Test reviews your average income over the six months before you file. This includes wages, commissions, bonuses, rental income, and business revenue. Many filers forget to include irregular or seasonal payments, which can significantly impact income calculations.

California households sometimes receive financial help from relatives, partners, or roommates. While not all outside contributions count as household income, some do affect how the Means Test evaluates your finances. Overlooking these details can make your income appear lower or higher than it truly is, which may impact the chapter you qualify for.

Incorrectly Calculating Household Size

Household size affects both the income threshold and several expense deductions. Many filers assume household size is determined by dependents listed on a tax return, but the Means Test relies on who lives with you and shares in household expenses.

California households often include extended family, blended families, or multigenerational living arrangements. Failing to count someone who financially relies on the household or counting someone who should not be included can change the outcome of your Means Test. A correct household size is essential for accurate comparison to California’s median income.

Overlooking Irregular or Occasional Expenses

California residents often encounter irregular or seasonal expenses, such as fluctuating utility bills, periodic childcare costs, or medical treatments. Many filers fail to document these expenses or forget to average them over time, which can result in an overstatement of disposable income.

The Means Test includes IRS allowances as well as certain actual expenses, so overlooking irregular but necessary costs can make your financial picture appear more flexible than it truly is. Proper documentation ensures the test reflects your real circumstances.

Misunderstanding Which Expenses Are Standardized

A common source of confusion involves which expenses are standardized and which can reflect actual spending. The Means Test relies heavily on IRS National and Local Standards. These allowances cover food, clothing, transportation, and housing. They remain the same regardless of where you live, except for certain housing and transportation categories that vary by region.

Many Californians spend significantly more than these allowances on essentials. While this often feels restrictive, the Means Test uses standardized figures to maintain consistency. Substituting actual expenses for categories that rely on IRS standards is a frequent error and can lead to objections or recalculations.

Not Applying Secured Debt Payments Correctly

Secured debts, such as mortgages and vehicle loans, play a major role in the Means Test. Some filers forget to deduct these payments or report them incorrectly, which can inflate disposable income. Mortgage arrears, past-due car payments, or loan modifications may also affect the calculation.

Because housing and vehicle costs in California can be significantly higher than national averages, accurate reporting of secured debt is essential. These deductions can influence both Chapter 7 eligibility and Chapter 13 plan requirements.

Using Outdated Median Income or IRS Standards

The Means Test incorporates updated figures from the U.S. Trustee Program, including IRS allowances and California median income levels. These figures change regularly, and using outdated numbers can lead to inaccurate results.

Some filers rely on old online calculators, outdated worksheets, or non-government resources. California bankruptcy courts periodically update forms and instructions as well. Using the wrong version can result in incorrect filings or court inquiries.

Failing to Document Special Circumstances

Special circumstances allow filers to deduct certain necessary expenses that fall outside standard allowances. These may include medical treatments, higher-than-average childcare costs, eldercare, or required job-related expenses. California residents often face higher costs in these areas, which makes special circumstances particularly important.

However, the bankruptcy court requires detailed documentation. Without proper proof, these expenses cannot be counted, even if they significantly affect your financial situation. Missing documentation is one of the most preventable mistakes.

Why Working With a California Bankruptcy Attorney Matters

The Means Test uses federal calculations, but California’s higher living expenses, varied county allowances, and complex financial realities influence how those calculations apply. Misunderstanding household income, using the wrong IRS allowances, or overlooking irregular expenses can affect whether you qualify for Chapter 7 or how your Chapter 13 plan is structured.

An experienced attorney can help you identify every allowable deduction, ensure you use the correct standardized numbers, and document any special circumstances that apply. Because the Means Test influences the entire course of your bankruptcy, accurate completion is essential for a smooth and successful filing.

Contact Wadhwani & Shanfeld

If you are preparing to file for bankruptcy or want clarity about how the Means Test applies to your household, we are here to help. At Wadhwani & Shanfeld, a Los Angeles bankruptcy lawyer can guide you through the process, review your financial information, and help you avoid common filing mistakes. Our board-certified bankruptcy specialists bring decades of experience serving California residents. Contact us today to schedule a free consultation.

Sources:

S. Courts – Means Test Forms (Official Forms 122A-1 and 122A-2)

California Courts – Bankruptcy Guide