South Dakota Bankruptcy Means Test Figures

The South Dakota Bankruptcy Means Test determines whether your household income qualifies you to file for Chapter 7 debt relief. The Means Test calculates your gross household income over the six full calendar months prior to filing, and then is averaged and annualized to calculate your Current Monthly Income (CMI).

If your annualized CMI falls at or below South Dakota’s median income for your household size, you automatically qualify under the income portion of the test. However, earning below the median doesn’t mean Chapter 7 is automatically your best move, as factors like non-exempt property equity, monthly disposable income, or catching up on past-due mortgage and car payments often dictate whether Chapter 7 liquidation or Chapter 13 reorganization is the right path.

By Alexander Hernandez, J.D., Professor, and Author of Consumer Bankruptcy Law (Routledge).

Key Points: South Dakota Bankruptcy Means Test

• Six-Month Lookback Period: The Means Test relies on the debtor’s gross Current Monthly Income (CMI) to determine initial Chapter 7 eligibility relative to South Dakota’s median income.
• Exceeding the Means Test: If household CMI exceeds the South Dakota median income threshold, a statutory “presumption of abuse” arises under 11 U.S.C. §707(b).
• The Presumption of Abuse: If a debtor fails the Means Test, then they complete Part 2 of the Means Test (Form 122A-2), applying standard IRS local housing, transportation, and expense deductions to evaluate whether Chapter 13 should be filed.
• Strategic Timing of Filing: If the Means Test is failed because of one high-earning month, delaying the bankruptcy filing until that month falls outside the six-month window can lower the CMI below state limits.
• Chapter 13 Advantages: Debtors with non-exempt assets, mortgage or car loan defaults, can reorganize their payments with Chapter 13 reorganization to cure arrearages and protect assets.

How the Means Test Works in South Dakota

The Means Test begins with Official Form 122A-1, which calculates your Current Monthly Income (CMI) pursuant to 11 U.S.C. §101(10A). The form takes your average gross household income over the six full calendar months prior to filing, annualizes that figure, and compares it against South Dakota’s median family income standards for an equivalent household size.

For example, if your total gross household earnings over the six-month lookback period were $45,000, your CMI equals $7,500 per month, translating to an annualized income of $60,000. This $60,000 figure is compared directly against South Dakota’s statutory median income threshold for your household size; falling at or below the state limit means you are not required to complete Official Form 122A-2.

Passing the first part of the Means Test does not automatically make Chapter 7 the best choice. Your budget and the market value of all personal and real property must be analyzed alongside South Dakota’s bankruptcy exemptions.

In addition, your actual earnings and expenses are compared on Schedules I (Income) and J (Expenses) to verify if disposable income exists to pay unsecured creditors.

If your annualized CMI exceeds South Dakota’s median income, you must complete Official Form 122A-2 to determine if you can rebut the statutory presumption of abuse under §707(b)(2).

Failing the Means Test and What It Means

Failing the initial median income comparison does not automatically disqualify a debtor from filing Chapter 7. Official Form 122A-2 incorporates IRS National and Local Standards for housing, utilities, and vehicle operational costs, along with deductions for mandatory payroll withholdings, health insurance, and contractually required payments on secured debts like home mortgages and automobile loans.

Consequently, many household filers whose gross income exceeds South Dakota’s median income overcome the statutory presumption of abuse once these allowable expenses are deducted under §707(b)(2).

The Means Test also provides for “special circumstances” under Section §707(b)(2)(B), such as a serious medical condition and active military duty to justify additional expense deductions.

Besides the Means Test, critical factors such as mortgage or vehicle payment defaults, the extent of asset protection offered by South Dakota’s statutory exemptions, and long-term financial goals determine whether Chapter 7 or 13 should be filed.

South Dakota Median Income Figures for 2026

Household Size	Annual Median Income	Monthly Median Income
1 Earner	$69,190	$5,765.83
2 Persons	$89,809	$7,484.08
3 Persons	$100,883	$8,406.91
4 Persons	$130,738	$10,894.83

For households exceeding four persons, add $11,100 for each individual.

Choosing the Right Bankruptcy Chapter to Save Your Home or Vehicle

If you are behind on your mortgage or auto loan payments, selecting the appropriate bankruptcy chapter is critical to retaining your property. While both Chapter 7 and Chapter 13 trigger the immediate protection of the automatic stay under §362 to halt foreclosure sales and vehicle repossessions, each chapter treats secured debt arrearages differently.

Chapter 7 Limitations for Past-Due Secured Debt

In Chapter 7, the automatic stay provides temporary relief by stopping enforcement actions. However, Chapter 7 doesn’t force a lender into a long-term repayment cure for past-due balances.

To keep a home or car in Chapter 7, you must be current on payments and able to protect any equity using South Dakota’s state property exemption. If you cannot cure the default quickly or enter into a reaffirmation agreement, the creditor will typically file a Motion for Relief from the Automatic Stay under §362(d) to resume foreclosure or repossession.

Chapter 13 Protections and Arrearage Cure

Chapter 13 offers a remedy for debtors seeking to preserve assets. Under Section 1322(b)(5), a Chapter 13 debtor can cure missed payments over a court-approved repayment plan lasting three to five years, allowing debtors to catch up on arrears and secure long-term asset retention.

Reducing Your Car Loan Balance Through a Chapter 13 Cramdown

One of the most powerful statutory protections available to debtors in Chapter 13 bankruptcy is the ability to reduce secured vehicle debt through a process referred to as a “cramdown”.

Under §506(a), a creditor’s secured claim is limited to the present fair market value of the collateral securing the debt. When an automobile has depreciated significantly below the outstanding loan balance, the excess portion of the loan can become reclassified as general unsecured debt. However, two requirements must be met.

Statutory Limitations: The 910-Day Rule

Under §1325(a)(9), the vehicle must have been purchased more than 910 days (approximately 2.5 years) prior to the petition date. If that requirement is met, then the car loan balance must be repaid in full through the reorganization plan.

For example, suppose the car has a fair market value of $12,000, but the balance on the auto loan is $25,000. The auto loan balance is “crammed down” to $12,000, and the difference of $13,000 becomes unsecured debt. The $12,000 must be paid in full through the Chapter 13 plan.

In addition, the interest rate is usually reduced, known as the Till interest rate, resulting in substantial savings. Upon plan completion and the receiving of the bankruptcy discharge, the car is paid off.

Stripping Second Mortgages and HELOCs in Chapter 13 Bankruptcy

Chapter 13 bankruptcy provides another powerful debt-relief tool known as lien stripping, which allows homeowners to eliminate a junior lien such as a second mortgage or Home Equity Line of Credit (HELOC) when there is zero equity in the property.

Under Section 506(a), if the current fair market value of a home is less than the outstanding balance owed on the senior (first) mortgage, there is no underlying property equity to attach to a junior lien. In this situation, the second mortgage or HELOC is deemed wholly unsecured. Under Section 1322(b)(2), the property must be the debtor’s principal residence.

Unlike a vehicle cramdown, the debtor is not required to pay the principal value of the stripped second mortgage through the Chapter 13 plan. Instead, the stripped lien receives the same pro-rata percentage distribution as other general unsecured creditors such as credit cards and medical bills, which is determined by disposable income on Schedules I and J and the Chapter 13 liquidation test under §1325(a)(4).

Lien Stripping Example

A South Dakota homeowner’s primary residence is valued at $240,000. The first mortgage balance is $250,000 and the second mortgage or HELOC is $40,000.

Because the $250,000 first mortgage exceeds the home’s total fair market value of $240,000, there is zero equity left to support the $40,000 junior lien. Through a motion, the court can reclassify the $40,000 HELOC as general unsecured debt. Upon successful completion of all plan payments and entry of the bankruptcy discharge, the second mortgage lien is wiped out.

Strategic Timing of Your Bankruptcy Filing

Because the Means Test calculates Current Monthly Income (CMI) based on the last six months of income pursuant to §101(10A), the timing of your petition date is critical. A temporary spike in household earnings, such as seasonal overtime, an annual bonus, or even a side hustle, can cause you to exceed South Dakota’s applicable median income threshold.

If a high-income month pushes your income above the state median, delaying your filing date allows that month to age out of the six-month calculation window. Once the high-income period drops beyond the six-month lookback, your CMI calculation adjusts downward, potentially restoring your eligibility for a Chapter 7 discharge under §707(b).

For instance, if an unusually high-earning month occurred three months prior to your filing date, postponing your petition for four additional months ensures that high-income month falls outside the statutory six-month lookback period, resulting in a significantly lower CMI figure on Official Form 122A-1.

Conclusion

While satisfying the South Dakota Means Test is a primary threshold requirement for Chapter 7 relief, passing the income test is only one component of a comprehensive bankruptcy analysis. You must also evaluate your assets and apply the South Dakota property exemptions, and calculate your actual real-time cash flow by comparing Schedules I (Income) and J (Expenses) to verify whether true disposable income exists.

For debtors who are behind on secured debt obligations such as home mortgages or vehicle loans, or who hold non-exempt equity that would be subject to liquidation by a Chapter 7 trustee, Chapter 13 reorganization provides protection under Section 1322 to cure arrearages and protect assets.

Educational Resources

• For Institutions: Colleges and universities may request examination copies of my textbook directly from Routledge Publishing.
• For Students & Practitioners: Single print and digital copies are available via Amazon Books.
• Video Lectures: Stream comprehensive legal breakdowns and video explanations on the Bankruptcy.blog YouTube Channel.

Bankruptcy Court & Consumer Resources

Explore additional consumer guides and state-specific directories to navigate your legal options:

• A step-by-step master guide to completing and understanding the bankruptcy petition.
• Bankruptcy Court Directory: Full listings for the federal bankruptcy court system and trustee contact information.
• State Bankruptcy Exemptions: Review your state‑specific exemptions or compare them with the federal exemptions.
• 341 Meeting Procedures: Prepare for your court date with updated rules, expectations, and practical guidance.

Please note that the information on this site does not constitute legal advice and should be considered for informational purposes only.

Bankruptcy Code and Statutes

• 11 U.S. Code §707 – Dismissal of a case or conversion to a case under Chapter 11 or 13.
• Official Form 122A-1. Chapter 7 Statement of Your Current Monthly Income.
• Official Form 122A-2. Chapter 7 Means Test Calculation.
• 11 U.S. Code §506 – Determination of secured status.
• 11 U.S. Code §1325 – Confirmation of plan.
• 11 U.S. Code §1322 – Contents of plan.
• 11 U.S. Code §362 – Automatic stay.