Chapter 7 Means Test Explained
Determine your eligibility for Chapter 7 bankruptcy relief
What Is the Chapter 7 Means Test?
The means test is a formula used to determine whether you have enough disposable income to repay your debts through Chapter 13 bankruptcy, or if you qualify for the quicker debt discharge available through Chapter 7. Implemented in 2005, this test ensures that Chapter 7 bankruptcy is reserved for those who truly cannot afford to repay their debts.
The test has two parts: first comparing your income to your state's median, and if you exceed it, then calculating your disposable income after allowable expenses. Approximately 90% of people who file for bankruptcy pass the means test and qualify for Chapter 7.
How the Means Test Works: Step by Step
Step 1: Calculate Your Current Monthly Income (CMI)
Your CMI is the average of all income you received during the 6 full months before filing bankruptcy. This includes:
- Wages, salary, tips, bonuses, overtime, and commissions
- Business income (gross receipts minus ordinary expenses)
- Interest, dividends, and royalties
- Rental and real property income
- Regular contributions from spouse (if not filing jointly)
- Regular contributions from household members or others
- Unemployment compensation (in most states)
- Pension and retirement income
- Workers' compensation
- State disability insurance
Step 2: Compare to State Median Income
Multiply your CMI by 12 to get your annual income, then compare it to your state's median income for your household size. The median income figures are updated regularly by the U.S. Trustee Program and vary significantly by state.
2026 Median Income Examples (Annual)
| State | 1 Person | 2 People | 3 People | 4 People |
|---|---|---|---|---|
| California | $70,218 | $92,456 | $101,753 | $119,032 |
| Texas | $58,942 | $78,123 | $85,457 | $98,765 |
| New York | $64,589 | $84,321 | $97,456 | $115,234 |
*Add $9,900 for each additional person beyond 4
Step 3: The Second Part of the Means Test (If Above Median)
If your income exceeds the state median, you must complete the second part of the means test, which calculates your disposable income by subtracting allowable expenses from your CMI.
Allowable Expense Deductions Include:
IRS National Standards:
- Food and clothing
- Personal care products
- Housekeeping supplies
- Out-of-pocket healthcare
IRS Local Standards:
- Housing and utilities
- Transportation costs
- Vehicle ownership costs
- Public transportation
Additional Actual Expenses:
- Taxes (income, Social Security, Medicare)
- Mandatory payroll deductions
- Life insurance premiums
- Court-ordered payments (child support, alimony)
- Child care expenses
- Health insurance, disability insurance
- Educational expenses for employment or disability
- Secured debt payments (mortgage, car loans)
- Priority debt payments (taxes, child support arrears)
- Charitable contributions (limited to 15% of gross income)
Step 4: Calculate Your Disposable Income
After subtracting all allowable expenses from your CMI, multiply the result by 60 (months) to determine your 5-year disposable income:
Disposable Income Thresholds (2026):
- Less than $8,175: You pass the means test and qualify for Chapter 7
- $8,175 to $13,650: Further analysis required (depends on your unsecured debt amount)
- More than $13,650: You likely don't qualify for Chapter 7 (must file Chapter 13)
Special Circumstances and Exceptions
Military Exception
Disabled veterans whose debts were incurred primarily during active duty or homeland defense activities are exempt from the means test entirely.
Business Debt Exception
If your debts are primarily business debts (more than 50% non-consumer debt), you are not required to take the means test.
Special Circumstances Adjustment
You may be able to adjust your CMI or expenses if you have "special circumstances" such as:
- Serious medical condition requiring ongoing treatment
- Call to active military duty
- Recent job loss or income reduction
- Caring for elderly, chronically ill, or disabled household member
Common Means Test Strategies
Legal Ways to Improve Your Means Test Results:
- Timing Your Filing: If your income has decreased recently, waiting a few months may improve your 6-month average
- Maximizing Deductions: Ensure you're claiming all allowable expenses, including retirement contributions
- Household Size: Include all dependents and anyone whose income contributes to household expenses
- Secured Debt Payments: Car loans and mortgages reduce disposable income
- Priority Debts: Paying down priority debts (taxes, child support) before filing
Means Test Calculator Walkthrough
Quick Calculation Example:
Scenario: Single person in California with $75,000 annual income
- Current Monthly Income (CMI): $6,250
- California median for 1 person: $70,218 annually ($5,851 monthly)
- Above median? Yes - must complete second part
- Total allowable expenses: $5,800
- Monthly disposable income: $450
- 60-month disposable income: $27,000
- Result: Exceeds $13,650 threshold - must file Chapter 13
What If You Don't Pass the Means Test?
If you don't qualify for Chapter 7, you have several options:
- File Chapter 13 Bankruptcy: Create a 3-5 year repayment plan based on your disposable income
- Wait and Refile: If your income is expected to decrease, waiting may help you qualify
- Seek Special Circumstances: Document any special circumstances that affect your finances
- Consider Alternatives: Debt settlement, consolidation, or negotiation with creditors
Frequently Asked Questions
Does my spouse's income count if we're not filing jointly?
Yes, if you're married and living together, your spouse's income must be included in the household income calculation, even if filing separately. However, you can deduct the portion of their income that doesn't contribute to household expenses.
How often do median income figures change?
The U.S. Trustee updates median income figures approximately every 6 months based on Census Bureau data. Always check current figures before filing.
Can I include my adult children in household size?
Yes, if they live with you and you provide more than half their support, or if they contribute income to the household that's included in your means test calculation.
What if my income varies significantly month to month?
The means test uses a 6-month average, which helps smooth out variations. If you expect continued fluctuation, consult with an attorney about the best timing for filing.
Next Steps
Calculate Your Eligibility
Use our free calculator to determine if you pass the means test.
Chapter 7 Requirements
Learn about all eligibility requirements beyond the means test.
Consult an Attorney
Get professional help with your means test calculation.
Chapter 13 Alternative
Learn about Chapter 13 if you don't pass the means test.