In order to file Chapter 7 bankruptcy, you must prove your need by passing the means test.

A major part of the Chapter 7 means test involves comparing your income to the median income in their state.

If your median income is less than your state’s median income level then you probably qualify to file Chapter 7 bankruptcy. If your income is above this level, then you may need to examine Chapter 13 bankruptcy.

If you already know that Chapter 7 bankruptcy is a good fit, you may want to go ahead and speak with a local bankruptcy attorney. We can connect you with a local Chapter 7 lawyer who can provide you with a free case evaluation.

Connect with a local Chapter 7 bankruptcy lawyer.

Learn more about the Chapter 7 means test.

Chapter 7 Means Test: The First Step

Find the median income level of your state and talk to a bankruptcy lawyer about your debt-relief options. Information updated No. 1, 2009 and is valid for one year from this date.

Note: Although we try to keep the means test median income information on this page as up-to-date as possible, the median income table may be updated at any time, and information on this page may be out of date. The latest information can be found at the U.S. Trustee Program Web site.

Updated as of: Nov. 1, 2009.

The means test isn’t like the exams you saw in school. Rather, the means test looks at your debts, income and assets. Because Chapter 7 bankruptcy is such a powerful tool for erasing debt, the courts want to ensure that it is only used by people truly in need.

The means test is a straightforward test and most debtors qualify to file Chapter 7 bankruptcy.

The test is divided into two parts and both focus on your income and expenses.

Chapter 7 Bankruptcy Means Test Steps

Step 1: Assess Monthly Income

The first part of the test compares your monthly income (which is determined by a worksheet that the court will provide) to the median income for your area and household size. If your monthly income is at or below your state median income level, the means test is over—there is no presumption of abuse and you can file for Chapter 7 bankruptcy.

The median will vary fairly significantly according to your geographic location and the size of your family. Depending on the state you live in, the 2006 median income for a family of four ranged from $52,217 to $92,205. The U.S. Trustee’s Office has a page on their web site with the most up-to-date median incomes.

Step 2: Deduct Allowable Expenses

If you find that your income exceeds the state median, it doesn’t necessarily mean that you won’t be able to file under Chapter 7. This just means you must move on to the second part of the test. During the second step, you will deduct certain allowable expenses from your monthly income based on IRS standards. The remaining amount over after these allowable expenses is your disposable income. Then you will multiply that number by 60 to determine how much disposable monthly income you’ll have over the next five years.

If the total turns out to be less than $6000, then you have passed the means test, and you may file bankruptcy under Chapter 7, since there is no presumption of abuse. On the other hand, if the total is over $10,000, then there is a presumption of abuse, though you will be given the chance to include additional necessary expenses to reduce your monthly income.

However, if your total disposable income for the five-year period falls between $6000 and $10,000, then you must make one more calculation. For this step, you will take your expected disposable income over the next five years—that number you calculated falling between $6000 and $10,000—and compare it to the total amount of your non-priority unsecured debts.

If your disposable income is less than 25% of the total of those debts, there is no presumption of abuse, and you therefore qualify to file under Chapter 7. Just as before, you will have the opportunity to show special circumstances that justify the inclusion of additional expenses.

Chapter 7 Bankruptcy Means Test Summary

In short, the means test works like this:

1. Compare your monthly income to the state median:

   • If your income is at or below the state median, the presumption does not arise and you “pass” the means test;
   • If your income is above the state median, go on to calculate your disposable income for the upcoming five year period.

2. Calculate your disposable income over the upcoming five years:

   • If that number is below $6000, the presumption does not arise and you “pass” the means test;
   • If that number is above $10,000, the presumption does arise, and you can file under Chapter 7 only with a showing of special circumstances;
   • If that number is between $6000 and $10,000, calculate 25% of your outstanding unsecured, non-priority debts.

3. Multiply your outstanding unsecured, non-priority debts by .25:

   • If your disposable income over the next five years (as calculated in step 2) is greater than 25% of your unsecured, non-priority debts, the presumption arises and you can file under Chapter 7 only with a showing of special circumstances;
   • If your disposable income over the next five years (as calculated in step 2) is less than 25% of your unsecured, non-priority debts, you “pass” the means test and can file under Chapter 7.

Even if you’ve passed the means test, you should know that your bankruptcy trustee can still throw your case out for abuse if he deems that your particular case warrants it.

In any case, your bankruptcy lawyer can give you more specific advice about what kinds of circumstances might cause a trustee to challenge or dispute your bankruptcy case.

Talk to a Chapter 7 Bankruptcy Lawyer

If you have any other questions about the Chapter 7 means test, speak to a local bankruptcy attorney as soon as possible.

Simply fill out free bankruptcy case evaluation form on this page or call us toll-free at 877-226-6844 and we’ll help you get in contact with a bankruptcy lawyer in your area.