What Is a Bankruptcy Means Test November 2025? Complete Guide for Arkansas Residents

Introduction

A means test is used to determine eligibility for assistance by evaluating an applicant’s income and assets. The bankruptcy means test is a federally mandated financial screening tool that determines whether you qualify for Chapter 7 bankruptcy or must file under Chapter 13 with a repayment plan. For Arkansas residents facing overwhelming debt, understanding this test is the critical first step toward achieving a fresh start through bankruptcy relief.

This guide covers everything Arkansas residents need to know about the means test: how current monthly income is calculated, what the 2026 Arkansas median income thresholds are, which expenses you can deduct, and what forms you must file. We’ll focus specifically on federal requirements as they apply in Arkansas, including local median income data and documentation standards used in Eastern and Western District bankruptcy courts. This guide does not cover business bankruptcy or complex asset protection strategies, which require individualized legal analysis.

Direct answer: The bankruptcy means test compares your average monthly income over the past six months to Arkansas’s median income for your household size. If your income falls below the state’s median income, you automatically qualify for Chapter 7. If above, a detailed calculation of disposable income determines eligibility or whether you must pursue Chapter 13 instead.

After reading this guide, you will understand:

• Exactly how the means test determines your bankruptcy chapter eligibility
• Arkansas median income limits for 2025-2026 by household size
• The complete calculation process for income and allowed expenses
• Which means test forms you must file and what documentation to gather
• Practical strategies for common challenges Arkansas filers face

What is a Means Test?

A means test is used to determine eligibility for assistance by evaluating an applicant’s income and assets. In the context of bankruptcy, the means test assesses whether an individual qualifies for Chapter 7 bankruptcy or must file under Chapter 13 with a repayment plan, based on their financial situation.

Means Test Calculator

If your income is more than the median, you may still qualify for Chapter 7 by deducting certain allowed expenses from your income.

Understanding the Bankruptcy Means Test

The bankruptcy means test is a financial eligibility screening tool created by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Congress designed this test to prevent individuals from discharging debts altogether through Chapter 7 when they actually have the ability to repay creditors through a structured plan.

The test serves a dual purpose in bankruptcy law: it screens Chapter 7 eligibility by analyzing whether filers truly lack means to repay, and it shapes Chapter 13 repayment plans by establishing how much disposable income must go toward creditors over the commitment period.

What the Means Test Determines

The means test determines your eligibility for different bankruptcy chapters based on your financial capacity to repay unsecured debts. For Chapter 7, the test evaluates whether you lack sufficient income to make meaningful payments to creditors—qualifying you for liquidation bankruptcy where most consumer debts are discharged.

For Chapter 13 filers, the means test calculation establishes your required plan length and payment amounts. If your income exceeds Arkansas’s median income, you must commit to a five-year repayment plan rather than the three-year minimum available to below-median filers.

The connection between test results and debt discharge options is straightforward: passing the means test opens the door to Chapter 7’s complete discharge of qualifying debts, while failing it directs you toward Chapter 13’s structured repayment approach.

Chapter 7 vs Chapter 13 Means Test Requirements

Chapter 7 requirements center on proving you cannot repay your debts. The Chapter 7 means test first compares your current monthly income to Arkansas’s median income for your household size. If you fall below the median income limit, no further calculation is required—you pass. If above, Form 122A-2 calculates your disposable income after allowed expenses to determine whether a presumption of abuse arises.

Chapter 13 requirements focus on establishing your repayment capacity. You must demonstrate regular income sufficient to fund a repayment plan, and your total debt must fall within statutory limits: as of April 1, 2025, unsecured debts must be under $526,700 and secured debts under $1,580,125. The means test determines your commitment period (three or five years) and minimum plan payment.

The key difference: Chapter 7 uses the means test as a gatekeeping function, while Chapter 13 uses it to structure your obligations.

Who Must Complete the Means Test

All individual bankruptcy filers with primarily consumer debts must complete means testing. This includes anyone filing for debt relief whose debts are not primarily business debts—meaning more than half your debt comes from personal, family, or household purposes rather than business operations.

Limited exemptions exist:

• Disabled veterans whose debts arose primarily during active duty or homeland defense activity are exempt from the means test
• Filers whose debts are primarily business debts may bypass the test
• Certain reservists and National Guard members qualify for temporary exemptions

Arkansas-specific considerations include using the correct median income data for cases filed in Arkansas courts. The Eastern and Western Districts of Arkansas follow federal forms but may have local filing preferences that your bankruptcy attorney should understand.

How the Arkansas Means Test Calculation Works

The means test calculation operates in two steps. First, your average monthly income is compared to Arkansas’s median income for your household size. If your income falls below the median, you qualify for Chapter 7 without further analysis. If above, the second step calculates your disposable income by subtracting allowed expenses from your gross income.

Accurate income averaging is essential for Arkansas residents. The test looks at a specific six month period—the six full calendar months before your bankruptcy filing date—to establish your current monthly income. This time period captures your actual recent financial situation rather than longer-term earning patterns.

Income Calculation Method

The six-month lookback period requires you to total all income received during the six full calendar months immediately preceding your bankruptcy case filing. This includes wages, salary, tips, bonuses, overtime, self-employment income, rental income, unemployment benefits, child support received, pension payments, and most other regular income sources.

To calculate your monthly average:

1. Add all gross income from all sources for each of the six calendar months
2. Divide the total by six to get your average income per month
3. Multiply by twelve to determine your annual income for comparison purposes

Arkansas median income thresholds effective November 1, 2025:

These figures come from Census Bureau statistical data as published by the U.S. Trustee Program. If your annualized current monthly income falls below your household’s threshold, you pass the means test and can proceed with Chapter 7.

Allowable Expense Deductions

When your income exceeds the state’s median, the test calculation allows you to subtract expenses to determine whether you have disposable income available for creditors. Expense deductions fall into several categories:

IRS national and local standards provide baseline living expenses amounts for food, clothing, personal care, and miscellaneous items. Housing and utilities use local standards that vary by Arkansas region—urban areas like Little Rock may have higher allowances than rural counties.

Actual expenses you can deduct include:

• Mortgage or rent payments beyond IRS standards (with documentation)
• Vehicle loan payments and lease costs
• Childcare and dependent care expenses
• Health insurance premiums not covered by employment
• Court-ordered child support and alimony payments
• Priority tax debts

Special circumstances allow additional deductions beyond standard amounts when you can document expenses that are extraordinary but necessary—such as ongoing medical treatment costs, care for elderly family members, or unusually high childcare costs. Arkansas bankruptcy courts require clear documentation supporting any special circumstance claims.

Disposable Income Analysis

After subtracting all allowed expenses from your current monthly income, you arrive at your monthly disposable income figure. This number determines whether a “presumption of abuse” arises that could block your Chapter 7 filing.

The formula: Monthly Disposable Income × 60 months = Five-Year Disposable Income

Current threshold amounts (through March 31, 2028):

• Below $10,275 over five years ($171.25/month): No presumption of abuse—you qualify for Chapter 7
• Between $10,275 and $17,150: Presumption arises if this amount would pay at least 25% of your unsecured debts
• Above $17,150 over five years ($285.83/month): Automatic presumption of abuse

If your disposable income is negative or falls below the lower threshold, you can proceed with Chapter 7. If presumption of abuse arises, you must either rebut it through special circumstances or file under Chapter 13 instead.

Required Forms and Documentation Process

The bankruptcy process requires specific means test forms that must be filed within 14 days of your bankruptcy petition. Federal forms are standard nationwide, though Arkansas courts may have additional local requirements or preferences for how income and expense information is presented.

Understanding which forms apply to your situation prevents delays and potential case dismissal.

Means Test Forms Overview

Different forms are required depending on your bankruptcy chapter and income level:

1. Form 122A-1 (Statement of Current Monthly Income) — Required for all Chapter 7 filers regardless of income. This form calculates your current monthly income and compares it to Arkansas’s median. If your income is below median, you may also file Form 122A-1Supp claiming exemption from further means testing.
2. Form 122A-2 (Chapter 7 Means Test Calculation) — Required only when your income exceeds Arkansas median income. This detailed form calculates your disposable income by documenting all allowed expenses, secured debt payments, and priority obligations.
3. Forms 122C-1 and 122C-2 for Chapter 13 — These serve analogous functions for Chapter 13 filers, establishing current monthly income and calculating disposable income to determine your commitment period and plan payments.
4. Supporting documentation — Pay stubs covering six months, tax returns (typically two years), bank statements (three to six months), and proof of secured debts, insurance costs, and other expenses.

Required Documentation Table

Organizing your financial records before beginning the means test calculation significantly streamlines the bankruptcy process. Gather all documents before meeting with a bankruptcy attorney to ensure accurate income and expense information from the start.

Common Arkansas Means Test Challenges and Solutions

Income Above Arkansas State Median

Arkansas residents frequently encounter specific challenges when completing the means test. Understanding these issues in advance helps you prepare documentation and develop strategies that maximize your chances of qualifying for your preferred bankruptcy chapter.

When your income exceeds the median income limit for your household size, strategic documentation of actual expenses becomes essential. Focus on:

Maximizing allowable deductions: Document every legitimate expense, including mortgage interest, property taxes, vehicle payments, childcare costs, and health insurance premiums. Actual expenses often exceed IRS standards, particularly for Arkansas residents in metropolitan areas where housing costs are higher.

Special circumstances that overcome presumption of abuse: If you face documented medical conditions requiring ongoing treatment, family members needing specialized care, or other extraordinary but necessary expenses, these may qualify as special circumstances allowing additional deductions. Courts require clear evidence—medical bills, care provider invoices, or other documentation—to support these claims.

When Chapter 13 becomes the better option: For Arkansas residents with steady income who fail the means test, Chapter 13 offers structured debt relief over three to five years while potentially protecting assets that Chapter 7 liquidation might require selling.

Irregular or Seasonal Income

Arkansas’s economy includes significant agricultural, tourism, and commission-based employment, creating income fluctuation challenges for means testing.

Six-month averaging impact: The means test uses a monthly average calculated from six calendar months of income. Seasonal workers may find their average income artificially inflated if they file during or immediately after their busy season. Timing your filing to include lower-income months can significantly affect your calculated current monthly income.

Documentation strategies: Maintain detailed records showing income variability. Tax returns demonstrating year-over-year income patterns can support arguments that a particular six-month period was unusually high compared to your typical earning capacity.

Recent Income Changes

The means test’s backward-looking design creates challenges when your financial situation changed after the calculation period.

Job loss or income reduction: If you lost employment or experienced significant income reduction after the six-month lookback period, this change doesn’t automatically affect your means test results. However, you may argue special circumstances based on changed conditions, particularly if the change is permanent or long-term.

Timing considerations: Some Arkansas residents benefit from waiting to file until lower-income months enter the six-month calculation window. If you recently lost a job, filing two or three months later may produce a lower average income figure that helps you pass the means test.

Consult with a bankruptcy attorney before making timing decisions, as delaying filing carries risks including continued creditor actions, potential asset changes, and accumulating interest or fees.

Conclusion and Next Steps

The bankruptcy means test determines which chapter of bankruptcy you qualify for, but passing the test doesn’t automatically mean Chapter 7 is your best debt relief option. Your complete financial picture—including assets, types of debts, income stability, and long-term goals—shapes which path provides the most effective fresh start.

Immediate action items:

• Gather six months of pay stubs and income documentation from all sources
• Compile two years of tax returns and recent bank statements
• Calculate your preliminary average monthly income and compare to Arkansas median income for your household
• Document all monthly expenses, including mortgage, vehicle, childcare, and medical costs
• Review Arkansas bankruptcy exemptions to understand what property you can protect

Related topics to explore:

• Arkansas bankruptcy exemptions determine what property you keep in Chapter 7
• Chapter 13 payment plans offer structured repayment for those who don’t qualify for Chapter 7 or prefer to protect specific assets
• Debt consolidation and debt settlement represent alternatives to bankruptcy that may suit certain situations

Ready to understand your specific situation? Contact WH Law for a free consultation to review your means test calculation and explore which debt relief options best fit your circumstances. Our bankruptcy attorneys understand Arkansas-specific requirements and can guide you through the entire bankruptcy process.

Additional Resources

• Arkansas median income data: Current thresholds by household size for cases filed after November 1, 2025
• IRS expense standards: National and local standards applicable to Arkansas regions, available through the Internal Revenue Service website
• Official bankruptcy forms: Forms 122A-1, 122A-2, 122C-1, and 122C-2 available through the U.S. Courts website
• Arkansas bankruptcy court information: Local rules and filing requirements for Eastern and Western Districts of Arkansas
• WH Law means test calculator: Preliminary eligibility assessment tool and having a free consultation with us. 

WH Law, is a debt relief agency. We help people file for bankruptcy protection under the U.S Bankruptcy Code.