Chapter 13 Rules: No Means Test Required

Many people choose Chapter 13 because their income is too high to pass the Chapter 7 "means test." Learn about the requirements you must meet to qualify for Chapter 13 bankruptcy.

By , Attorney · University of the Pacific McGeorge School of Law

If you plan to file for Chapter 13 bankruptcy, you won't need to take the "means test" used to determine Chapter 7 bankruptcy eligibility in the traditional sense. However, people who file for Chapter 13 go through a similar income means test to determine how long their Chapter 13 repayment plan will last and the amount of disposable income they pay creditors.

Also, filers must meet other Chapter 13 bankruptcy eligibility criteria. For instance, your debts can't exceed current limits, you must be able to pay everything required by the Chapter 13 payment rules, and more.

After learning about qualifying for Chapter 13 bankruptcy, 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.

The Means Test for Chapter 7 Bankruptcy

The Chapter 7 bankruptcy means test determines if you have enough income to repay some of your debts through a Chapter 13 bankruptcy repayment plan. It's a two-part test. If your gross income doesn't exceed your state's median income for a similar family size, you pass and don't need to take the second part.

However, suppose your income is higher than your state's median income. In that case, you'll have another opportunity to pass the Chapter 7 means test. You'll deduct allowed expenses from your gross income. If you don't have enough remaining to pay creditors through a Chapter 13 plan, you'll qualify for Chapter 7.

If you fail the means test because you have more income than the law allows, your Chapter 7 filing is presumed abusive. You won't qualify for a Chapter 7 discharge unless you show otherwise.

The Role of Income, the Means Test, and Plan Length in Chapter 13

One reason income is important in Chapter 13 bankruptcy is that it determines the length of your repayment plan. If your income is less than your state's median income, your repayment plan will probably last three years. If your income exceeds your state's median income, your repayment plan will probably last five years.

But you'll need to meet another income requirement. Most potential Chapter 13 filers aren't concerned with income that is too high but whether they have enough income. If you can't fund a repayment plan, you won't be eligible for Chapter 13.

Other Chapter 13 Bankruptcy Filing Requirements

Here are a few Chapter 13 requirements you'll need to meet:

  • Businesses can't file. Chapter 13 is available to individuals and sole proprietors. Businesses, companies, and corporations aren't eligible. Learn about bankruptcy for small businesses.
  • Debts can't exceed Chapter 13 limits. A filer's total debt can be up to $2.75 million. This amount represents a temporary increase valid until July 2024 unless extended. Otherwise, Chapter 13 debt limits will revert to $1,395,875 secured debt and $465,275 unsecured debt (amounts apply until March 31, 2025). Secured debt is guaranteed by collateral, like your house or car. All other debts, such as credit card balances, medical bills, and back rent, are unsecured.
  • Filers must propose a "confirmable" plan. Your repayment plan must pay off all required debts (and you must earn enough to implement the plan). Otherwise, the bankruptcy court won't "confirm" or approve your plan at the Chapter 13 confirmation hearing.

Learn how to calculate a Chapter 13 monthly payment.

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

Chapter 13 Statement of Your Current Monthly Income
and Calculation of Commitment Period

Chapter 13 Plan

Chapters 7 and 13 Bankruptcy Forms

Chapter 7 Bankruptcy Document Checklist

More You Might Like

Your Car in Chapter 13 Bankruptcy

Keeping Two Cars in Chapter 13 Bankruptcy

Chapter 13 Bankruptcy: What If I Have a Lot of Equity in My Home?

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.

Updated April 17, 2024

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