What Alabama Residents Need to Know About the Means Test for Bankruptcy
A tight budget, an unexpected layoff, or a string of medical bills can empty even the most carefully managed savings. When that happens, many Southwest Alabama families turn to bankruptcy lawyers Mobile, AL to find out whether Chapter 7 is available or whether Chapter 13’s repayment structure makes better sense. The gatekeeper for that choice is the federal “means test.”
Introduced by Congress in 2005, the test compares your household income and certain allowed expenses to formulas set by the U.S. Trustee Program. If your disposable income falls below those benchmarks, a fresh‑start in Chapter 7 may be open; otherwise, Chapter 13 might be required. In either case, Loris Law Firm uses the means test every day to help clients decide the straightest path to financial relief.
Need clear guidance right away? Call our top Mobile, AL bankruptcy attorney for a free, confidential review of your numbers—no strings attached.
Why the Means Test Matters in Mobile, AL Bankruptcy Cases
Before 2005, debtors with high earnings could still file under Chapter 7, leading Congress to fear “abusive” filings. The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) added 11 U.S.C. § 707(b), directing courts to dismiss Chapter 7 petitions if a debtor who can repay opts for full liquidation. Under this statute, a presumption of abuse arises when the means test shows sufficient disposable income to pay unsecured creditors. The test therefore determines whether you qualify for Chapter 7 or must propose a Chapter 13 plan.
Comparing Your Household Income to Alabama’s Median
The first screen is simple math. Add all gross income earned by household members during the six months before filing, then annualize it. Compare that figure to the Census‑based medians that the Department of Justice updates twice each year. For cases filed on or after April 1 2025, the Alabama medians are:
| Household Size | Annual Income |
| 1 | $60,786 |
| 2 | $72,639 |
| 3 | $83,278 |
| 4 | $101,771 |
Add $11,100 for each additional family member. If your annualized income is below the line, you generally pass the first half and can pursue Chapter 7 bankruptcy in Alabama without further calculation.
Calculating Allowed Expenses and Disposable Income
Debtors above the state median proceed to Form 122A‑2, where IRS national standards and actual secured‑debt payments are deducted from current monthly income. The difference, multiplied by 60, equals your disposable income for the five‑year “look‑ahead.” If that total exceeds $15,150—or between $9,075 and $15,150 while paying less than 25 percent of unsecured debt—the presumption of abuse arises.
Many clients have tried debt consolidation in Mobile, AL only to learn that the means test often paints a more accurate, court‑accepted picture of their finances. Properly documenting mortgage interest, child‑care fees, and health‑insurance costs can move a borderline debtor from Chapter 13 to Chapter 7.
Special Circumstances Can Tilt the Balance
Congress allowed judges to deviate from the disposable‑income outcome for “special circumstances,” such as a serious illness or active‑duty military orders. Proving these circumstances takes more than a letter; it requires sworn statements and supporting receipts, something an Alabama bankruptcy lawyer prepares regularly. Even when a debtor earns above‑median wages, a forced pay cut or catastrophic medical expense can still clear the way for Chapter 7.
How the Test Influences Chapter 7 vs. Chapter 13 Strategy
A passed means test usually leads to Chapter 7, eliminating credit‑card balances, signature loans, and past‑due utilities in about four months. When your disposable income fails the test, Chapter 13 builds a three‑to‑five‑year repayment schedule based on what the test says you can afford. While a skilled bankruptcy attorney in Mobile can sometimes rebut the presumption, deciding whether to fight or accept Chapter 13 depends on your goals—keeping a house with arrears often tips the scale toward reorganization.
What to Bring to Your First Meeting with the Best AL Bankruptcy Attorney
Successful filings hinge on records. Gather six months of pay stubs, two years of tax returns, mortgage and vehicle statements, insurance bills, and evidence of any unusual expenses. The means test can feel like a maze, but the seasoned team at Loris Law Firm streamlines every calculation, challenges unfair disposable‑income findings, and crafts filings built to succeed—so contact us today to start rebuilding your financial life