Is Median Income Gross or Net for the Means Test?

For the bankruptcy means test, median income is measured against your gross income, not your net or take-home pay. The figure the court uses is called Current Monthly Income, and it starts from what you earn before taxes, insurance premiums, retirement contributions, or any other payroll deductions come out. Those deductions matter later in the process if your gross income exceeds your state’s median, but they play no role in the first comparison.¹

What Current Monthly Income Actually Measures

Current Monthly Income, or CMI, is the average of nearly all money you received each month during a defined look-back period, whether or not that money is taxable. If you file jointly, your spouse’s income is included. Regular financial contributions from anyone helping cover your household bills are included too.¹

Because the starting point is gross, the money your employer withholds for federal and state income tax, Social Security, Medicare, health insurance, 401(k) contributions, and union dues is not subtracted here. You report your CMI on Official Form 122A-1, and the court annualizes it and compares the result to the median income for your state and household size.²

What You Add Up as Gross Income

Form 122A-1 walks through each type of income line by line, and the court expects every category that applies to you to be included:³

Gross wages, salary, tips, bonuses, overtime, and commissions before any payroll deductions.
Alimony and maintenance you receive from a former spouse.
Regular contributions from anyone who helps pay your household expenses, including a live-in partner, roommates, parents, or adult children. Child support you receive belongs here as well.
Interest, dividends, and royalties.
Unemployment compensation, though some courts have treated it as excluded when it arises under the Social Security Act.
Pension and retirement income, unless it comes from a military disability or combat-related source.

The category on household contributions deserves attention. The U.S. Trustee Program has clarified that these count even when the money is paid directly to your creditors on your behalf, such as a parent covering your car loan or a partner paying the rent, and no written agreement is required. If the payments happen regularly, they count.⁴

Two Places Where the Number Isn’t Literally Gross

Business and rental income are the exceptions. On Form 122A-1 you report gross receipts, then subtract ordinary and necessary operating expenses, and enter only the difference. A freelancer who collects $8,000 a month but spends $3,000 on supplies, software, and subcontractors reports $5,000. This keeps overhead from being counted as personal income.³

If you are married and your spouse is not filing, your spouse’s gross income still goes on Form 122A-1. A separate form later in the process, Form 122A-2, lets you subtract the portion of your spouse’s income that does not go toward shared household expenses, such as your spouse’s own tax liability and any support payments to someone outside your household. That adjustment is not part of CMI itself; it comes into play only if your combined gross puts you over the median.⁵

Income That Doesn’t Count at All

Some income is carved out of CMI entirely. It never gets reported as income on the means test, and it cannot push you above the state median:

All payments under the Social Security Act, including retirement, survivor, SSDI, and SSI benefits. A retiree whose only income is a $2,400 monthly Social Security check has zero CMI for means test purposes.¹
Military disability pay, combat-related injury compensation, and survivor benefits paid under military pay statutes. If you receive retired pay under the military disability retirement system, only the amount exceeding what you would have received under standard retirement is excluded.³
Payments received because you were the victim of a war crime, a crime against humanity, or international or domestic terrorism.¹

The Six Months That Get Averaged

CMI is not what you earned last month. It is the average of your gross income over the six full calendar months immediately before you file. If you file in July, the look-back covers January through June. The month you file is not part of the average.¹

The averaging smooths out short-term swings. If you earned $5,000 a month for three months and $2,500 for the other three because your hours dropped, your CMI is $3,750. Because the window is mechanical, timing matters. Someone who recently lost a higher-paying job may benefit from waiting a few months so the lower-income months replace the higher ones in the average. Someone who just started a better-paying job may want to file sooner, before the bigger paychecks lift the average.

Comparing the Gross Number to the Median

Once you have your average CMI, multiply it by 12. That annualized figure is what gets compared to the median income for your state and household size, as published by the U.S. Census Bureau and formatted for bankruptcy forms by the Department of Justice.⁶

The current median for a one-person household in Alabama is $62,672, and $104,003 for a four-person household. Each person above four adds $11,100. Numbers vary significantly by state, so pulling your own state’s figures from the DOJ table is a necessary step. If your annualized gross falls at or below the median, you pass this part of the test automatically. If it exceeds the median, you move on to Form 122A-2, where allowable expenses come in and the analysis shifts toward disposable income.²

The Bankruptcy Code does not define “household size,” and courts have taken different approaches. Some count everyone under the roof, some count only tax dependents, and some use an “economic unit” test that includes anyone contributing income or creating expenses. The method your court uses can shift the median threshold, so local practice matters when your household is anything other than straightforward.

When the Means Test Doesn’t Apply at All

The means test only applies when your debts are primarily consumer debts, meaning debts you took on for personal, family, or household purposes. If more than half your total debt is non-consumer, such as personal guarantees on business loans, credit card balances run up for business expenses, mortgages on investment properties, or in some courts income tax debt, the means test is off the table entirely.⁷ Whether your gross income is above or below the state median simply doesn’t matter to your Chapter 7 eligibility in that situation.

For everyone else, the answer stays the same: it is your gross income, averaged over six months, with a specific list of exclusions and two categories reported net, that gets compared to your state’s median.

1
Office of the Law Revision Counsel. 11 U.S.C. 101 – Definitions
2
United States Courts. Chapter 7 – Bankruptcy Basics
3
United States Courts. Chapter 7 Statement of Your Current Monthly Income – Official Form 122A-1
4
Department of Justice. Chapter 7 Line by Line Means Test Analysis
5
United States Courts. Chapter 7 Means Test Calculation – Official Form 122A-2
6
U.S. Trustee Program/Dept. of Justice. Census Bureau Median Family Income By Family Size
7
Office of the Law Revision Counsel. 11 U.S.C. 707 – Dismissal of a Case or Conversion to a Case Under Chapter 11 or 13