Bankruptcy Chapter 7 Means Test

Here you'll get an overview of the means test, including the basic steps involved in taking the test.

Updated by , Attorney (Tulane University School of Law)

If you want to file for Chapter 7 bankruptcy, you must pass the means test. The means test looks at your income, and in some cases, your expenses and debts, to determine if you can afford to pay back some of your debts. If so, you might not be allowed to use Chapter 7. Instead, you could use Chapter 13 to file for bankruptcy.

Once you've learned about the Chapter 7 means test, check out the resources provided at the end of the article. You'll find links to applicable bankruptcy forms and additional articles we think you'll enjoy.

What Is the Means Test?

The main goal of the means test is to discover higher-earning debtors who can pay back some or all of their debt in Chapter 13 rather than allowing them to discharge their debt in Chapter 7. Although Chapter 7 filers might lose any property they can't "exempt" or protect, filers don't directly repay any debt. Unless they own valuable nonexempt property they really want to keep, most filers who can choose between Chapters 7 and 13 opt for Chapter 7.

Chapter 7 Means Test Steps

Step 1: Calculating Means Test Income

The first part of the means test compares your current monthly income to the median income in your state for a household of your size. The median income is a statistic similar to the average. If your income is less than the median, you qualify to file Chapter 7. If not, you must do more calculations to figure out if you might still be eligible.

Each state's median income amounts are on the U.S. Trustee Program webpage.

Step 2: Calculating Means Test Expenses and Required Payments

The means test becomes more complicated if your income exceeds the state median. After subtracting allowed expenses, you must determine whether you would have enough disposable income left to pay off some of your unsecured debts (credit card bills, medical debt, and so on).

If your disposable income equals or exceeds a minimum amount set by law, you won't qualify for Chapter 7 without special circumstances. If you want to file for bankruptcy, you might be able to use Chapter 13 instead. Because your income exceeds the state median, you will have to use a five-year repayment plan. People with income below the state median can repay debts over as few as three years if they choose to use Chapter 13.

Step 3: Crunching the Chapter 7 Means Test Numbers

The means test is relatively straightforward if your income is less than the state median. However, it is quite complex for those with higher incomes. Not only will you have to do pages of calculations, but you must also use the correct income and expense figures for your area and household size.

To find the figures, you'll start by going to the U.S. Court's means testing page. In the "Data Required for Completing the 122A Forms and the 122C Forms" box, select the most recent time period and click "Go." It will take you to a page with links to your state's median income and state and national standards for food, housing, and other expenses. For example, to find a state-by-state median income chart, click on "Median Family Income Based on State/Territory and Family Size."

How to Pass or Even Avoid the Means Test

If you don't qualify, check your entries before giving up. You might have made a calculation error, or you might not need to take the test at all.

If You Fail the Chapter 7 Bankruptcy Means Test, Review the Figures

Making Chapter 7 means test mistakes is commonplace because the means test is one of the most complicated forms debtors must complete. These errors, if fixed, might correct the problem:

Income errors. You'll include income earned during the entire six months before filing. So, a December 15 filing would consist of earnings from June through November but not May or December. Also, don't include a spouse's income used to pay debts you aren't obligated to pay, such as child support payments. You'll also exclude a support obligation owed to you unless you receive the money.

Missing deductions. Did you include income tax paid each month and mandatory union dues? Did you deduct costs related to your spouse's separate household? Make sure you understand what you can deduct.

If you still haven't passed after recalculating your entries, consider consulting with a local bankruptcy attorney. Sometimes, an experienced attorney can point out legal ways of increasing expenses or decreasing income so you can pass.

Learn more about how expenses are documented in What Expenses Can Help You Pass the Bankruptcy Means Test?

When You Might Not Need to Take the Means Test

Under certain limited circumstances, you can avoid having to take the means test at all. Five circumstances might help you pass or avoid it.

  1. You're a disabled veteran who incurred debts while on active duty or performing homeland defense activities.
  2. You're a reservist or member of the National Guard called to active duty/homeland defense.
  3. Your debts are primarily not consumer debts. Consumer debts are those associated with your personal needs or your household. The most common non-consumer debts are business debts, but other debts, like income taxes, can qualify.
  4. You have "special circumstances" that would make it unfair for you to be held to the strict standards of the means test. The statute lists two: a call to active duty and serious medical issues. The courts have considered other special circumstances like increased expenses due to natural disasters or taking in orphaned nieces and nephews.
  5. You have little disposable income. Be sure to list your income and all of your expenses accurately. Ensure that expenses like long-term care insurance and union dues are accurately characterized. Don't overlook payments on title loans, overdue taxes, child care, healthcare expenses, unreimbursed employment expenses, education for employment of a disabled child, and charitable contributions. Properly documented, these expenses can help you pass the means test by showing how little disposable income you really have.

Delaying Filing Might Help You Pass the Chapter 7 Bankruptcy Means Test

When determining whether you qualify for Chapter 7 bankruptcy, the means test looks at your income for the six months preceding your filing date. However, it might not accurately reflect your current circumstances.

If you recently received a pay cut or experienced a decreased income, simply waiting a few months to file your case might be enough. Delaying a filing can lower your means test average income enough to qualify you for Chapter 7 bankruptcy.

Find out the downside of filing for bankruptcy.

People Who Fail the Chapter 7 Means Test File for Chapter 13 Bankruptcy

If you can't pass the Chapter 7 bankruptcy means test, you might qualify for Chapter 13 bankruptcy instead. In Chapter 13 bankruptcy, you propose a plan to pay back some of your debts over three to five years. How much you repay will depend on your income, expenses, and the value of nonexempt property.

Although some debtors end up paying only pennies on the dollar towards their nonpriority unsecured debts such as credit cards and medical bills, it isn't always the case. And all Chapter 13 filers struggle to pay the hefty monthly payment.

Even so, Chapter 13 bankruptcy offers valuable benefits. For instance, filers can save a house or car after falling behind on the financing payment. So filing for bankruptcy might still be in your best interest even if you aren't eligible for Chapter 7.

Navigating Your Bankruptcy Case

Bankruptcy is essentially a qualification process. The laws provide instructions for completing a 50- to 60-page bankruptcy petition, and because the rules apply to every case, you can't skip a step. We want to help.

Below is the bankruptcy form for this topic and other resources we think you'll enjoy. For more easy-to-understand articles, go to TheBankruptcySite.

More Bankruptcy Information

Bankruptcy Forms and Document Checklist

Downloadable Copies of Bankruptcy Forms

Chapter 7 and 13 Bankruptcy Forms

Chapter 7 Bankruptcy Document Checklist

More You Might Like

What Debts Can I Erase in Bankruptcy?

What Property Can I Keep When I File For Bankruptcy?

What's Involved in the Chapter 7 Bankruptcy Process?

We wholeheartedly encourage research and learning, but online articles can't address all bankruptcy issues or the facts of your case. The best way to protect your assets in bankruptcy is by hiring a local bankruptcy lawyer.

Get Professional Help
Get debt relief now.
We've helped 205 clients find attorneys today.
There was a problem with the submission. Please refresh the page and try again
Full Name is required
Email is required
Please enter a valid Email
Phone Number is required
Please enter a valid Phone Number
Zip Code is required
Please add a valid Zip Code
Please enter a valid Case Description
Description is required

How It Works

  1. Briefly tell us about your case
  2. Provide your contact information
  3. Choose attorneys to contact you