Tennessee Bankruptcy Means Test Figures

The Tennessee 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, which is then averaged and annualized to establish your Current Monthly Income (CMI).

If your annualized CMI falls at or below Tennessee’s median income for your household size, you automatically qualify under the income portion of the test. However, earning below the median does not mean Chapter 7 is automatically your best option, as factors like non-exempt asset equity, monthly disposable income, or catching up on delinquent mortgage and vehicle payments often dictate whether Chapter 7 liquidation or Chapter 13 reorganization is the best path.

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

Key Points: Tennessee Bankruptcy Means Test

• Six-Month Lookback Period: The Means Test uses the debtor’s gross income from the six months before filing to determine initial Chapter 7 eligibility relative to Tennessee’s median income limits.
• Exceeding the Median Income: If household CMI exceeds Tennessee’s applicable Tennessee’s median income, a statutory “presumption of abuse” arises under 11 U.S.C. §707(b).
• Evaluating the Presumption of Abuse: Debtors who exceed the median income must complete Form 122A-2 to apply standard IRS local housing, transportation, and living expense deductions to evaluate whether sufficient disposable income exists to fund a Chapter 13 plan.
• Strategic Timing of Filing: Because the CMI calculation relies strictly on the six-month window, delaying a filing until an unusually high-earning month drops out of the lookback period can effectively lower a debtor’s monthly average income.
• Chapter 13 Reorganization Advantages: Debtors with non-exempt property, mortgage defaults, or delinquent vehicle loans can file Chapter 13 to cure arrearages over a three-to-five-year plan while protecting valuable assets from liquidation.

How the Means Test Works in Tennessee

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 directly against Tennessee’s median family income for an equivalent household size.

For example, if your total gross household earnings over the six-month lookback period were $36,000, your CMI equals $6,000 per month or $72,000 annually. Comparing this annualized figure against Tennessee’s statutory median income for your household size determines whether you automatically qualify for Chapter 7 bankruptcy, avoiding completing Official Form 122A-2.

However, passing the first part of the Means Test does not automatically make Chapter 7 the best choice. Your overall budget, asset equity, and property values must be analyzed against Tennessee’s statutory bankruptcy exemptions. In addition, your actual income and ongoing expenses are evaluated on Schedule I (Income) and Schedule J (Expenses) to verify whether sufficient disposable income exists to pay unsecured creditors.

If your annualized CMI exceeds Tennessee’s median income, you must complete Official Form 122A-2 to calculate allowable statutory deductions and determine whether you can rebut the presumption of abuse under Section 707(b)(2).

Failing the Means Test and What It Means

Failing the Means Test 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, alongside deductions for mandatory payroll withholdings, health insurance, and required payments on secured debts like home mortgages and vehicle loans.

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

The Means Test also provides for “special circumstances” under §707(b)(2)(B), allowing filers to justify additional expense deductions for extraordinary situations such as serious medical conditions, job loss, or active military duty.

Beyond the Means Test, critical factors such as catching up on mortgage or vehicle payments, assets not protected by Tennessee’s exemptions, and long-term financial goals ultimately determine whether Chapter 7 liquidation or Chapter 13 reorganization is the appropriate path.

Tennessee Median Income Figures for 2026

Household Size	Annual Median Income	Monthly Median Income
1 Earner	$63,979	$5,331.58
2 Persons	$82,846	$6,903.83
3 Persons	$97,511	$8,125.91
4 Persons	$109,585	$9,132.08

For households exceeding four persons, add $11,100 for each additional 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 creditor enforcement actions. However, Chapter 7 does not force a lender into a long-term repayment plan to cure past-due balances.

To keep a home or car in Chapter 7, you must generally be current on your payments and able to protect any equity using Tennessee’s property exemptions such as the personal property wildcard exemption under Tenn. Code Ann. §26-2-103 or the homestead exemption under Tenn. Code Ann. §26-2-301.

If you cannot cure the default quickly or enter into a formal reaffirmation agreement with the lender, the creditor will typically file a Motion for Relief from the Automatic Stay under Section 362(d) to resume foreclosure or repossession proceedings.

Chapter 13 Protections and Arrearage Cures

Chapter 13 provides a powerful statutory remedy for debtors seeking to preserve assets like homes and vehicles. Under Section 1322(b)(5), a Chapter 13 debtor can cure pre-petition mortgage or auto loan arrearages over a court-approved repayment plan lasting three to five years. This allows filers to catch up on missed payments over time.

Reducing Your Car Loan Balance Through a Chapter 13 Cramdown

One of the most effective tools available to debtors in Chapter 13 bankruptcy is the ability to reduce secured vehicle debt through a process known as a “cramdown.”

Under Section 506(a), a creditor’s secured claim can be limited to the present fair market value of the collateral securing the loan. When an automobile has depreciated significantly below the outstanding loan balance, the excess portion of the loan above market value is reclassified as general unsecured debt, which is often paid cents on the dollar through the plan.

Statutory Limitations: The 910-Day Rule

To utilize a vehicle cramdown, debtors must satisfy the statutory requirements under §1325(a)(9):

The vehicle must have been purchased for personal use more than 910 days (approximately two and a half years) before the bankruptcy filing date. The second requirement is that the secured portion is paid in full through the Chapter 13 plan.

For example, suppose a debtor purchased a vehicle over 910 days ago that currently has a fair market value of $12,000, but carries an outstanding loan balance of $25,000. Through a Chapter 13 cramdown, the secured claim is reduced to $12,000 (the market value), while the remaining $13,000 balance is reclassified as general unsecured debt.

In addition to reducing the principal balance, the interest rate on the crammed-down loan can also be reduced to a prime-plus-risk premium rate, commonly referred to as the Till rate, resulting in substantial savings. Upon successful plan completion and receipt of the bankruptcy discharge, the vehicle lien is satisfied, and the car is owned free and clear.

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 junior liens such as second mortgages or Home Equity Lines of Credit (HELOCs) when there is zero equity remaining in the property to support the junior debt.

Under §506(a), if the current fair market value of a home is less than the outstanding balance owed on the 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 and under §1322(b)(2), the junior lien is removed (stripped).

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 is reclassified and receives the same pro-rata percentage distribution as other general unsecured creditors such as credit card balances and medical bills.

Lien Stripping Example

Consider a Tennessee homeowner whose primary residence is valued at $240,000:

• First Mortgage Balance: $250,000.
• Second Mortgage / HELOC: $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 secure the $40,000 second mortgage. In this case, the court can reclassify the $40,000 HELOC as a general unsecured claim.

Upon successful completion of all Chapter 13 plan payments and entry of the bankruptcy discharge, the second mortgage lien is permanently extinguished, leaving the homeowner with only the first mortgage on the property.

Strategic Timing of Your Bankruptcy Filing

Because the Means Test is 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 temporary side-gig income, can cause you to exceed Tennessee’s median income.

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, restoring your eligibility for a Chapter 7 discharge without triggering the statutory presumption of abuse under §707(b).

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

Conclusion

While satisfying the Tennessee Means Test is a primary requirement for Chapter 7 relief, passing the initial income test is only one component. You must also evaluate your assets under Tennessee’s property exemptions, and calculate your actual real-time cash flow by comparing Schedule I (Income) and Schedule J (Expenses) to determine disposable income.

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 debtors the opportunity to catch up on missed payments and keep assets not protected by the Tennessee exemptions.

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.

Tennessee Statutory References and Bankruptcy Code References

• 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.C. §101 (2024). Definitions.
• 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.
• §26-2-103. Personal property selectively exempt from seizure; exception.
• §26-2-301. Basic exemption.