You qualify for Chapter 7 bankruptcy if your household income is at or below the median for your state and family size, or, when your income is higher, if a fuller calculation shows you don’t have enough disposable income left after allowed expenses to meaningfully repay creditors. You also need to clear a few other gates: any waiting period from a prior bankruptcy, a required credit counseling course before you file, and, if it applies to you, a check on whether your debts are the kind Chapter 7 can actually erase.
Compare Your Income to Your State’s Median
The first question is whether your income sits at or below the median for a household your size in your state. If it does, you pass this part of the means test automatically and can move forward without any further income analysis.1United States Courts. Chapter 7 – Bankruptcy Basics
The income figure is not your current paycheck. Bankruptcy law defines “current monthly income” as the average of all gross income you received during the six full calendar months before your filing date.1United States Courts. Chapter 7 – Bankruptcy Basics It includes wages, business income, rental income, interest, dividends, and regular financial contributions from other household members. Social Security benefits are excluded.
You report this on Official Form 122A-1. The U.S. Trustee Program publishes updated median income figures periodically, and you compare your annualized income against the current number for a household of your size.2U.S. Department of Justice. Median Income – U.S. Trustee Program Below the median, you are done with the means test.
What Happens if Your Income Is Above the Median
Higher income doesn’t automatically disqualify you. It moves you to the second part of the means test, on Form 122A-2, which decides whether your filing carries a “presumption of abuse” — meaning the court presumes you can afford to repay some of your debts and belongs in a repayment plan under Chapter 13 instead.1United States Courts. Chapter 7 – Bankruptcy Basics
The calculation subtracts standardized living expenses from your current monthly income to produce a monthly disposable income figure. Those expense deductions are not what you actually spend; they come from IRS-published national and local standards for categories like housing, food, transportation, and health care. You multiply the monthly disposable income by 60 months to project your disposable income over five years.
Three outcomes are possible:
- Below $10,275 over 60 months: no presumption of abuse. You pass and can proceed with Chapter 7.
- $17,150 or more over 60 months: presumption of abuse applies. The court will likely require Chapter 13 instead.
- Between $10,275 and $17,150: presumption of abuse applies only if your projected disposable income would cover at least 25 percent of your nonpriority unsecured debts.
Even when the presumption is triggered, you can try to rebut it by showing special circumstances, such as a serious medical condition or a call to active military duty, that justify additional expenses or reduce your income.
Who Skips the Means Test Entirely
Two groups don’t have to take the means test at all.
The first is debtors whose debts are not primarily consumer debts. The means test applies only when most of what you owe is consumer debt — credit cards, medical bills, personal loans. If the majority of your debt comes from a business, you skip the means test.
The second is certain disabled veterans. If you have a disability rating of at least 30 percent from the Department of Veterans Affairs, or you were discharged because of a disability sustained in the line of duty, you can skip the means test as long as the debts were incurred while you were on active duty or performing a homeland defense activity.
If either exemption applies, you file a separate statement of exemption in place of the means test forms.
Waiting Periods From a Prior Bankruptcy
Even if your income clears the means test, a recent bankruptcy can block a new discharge. The waiting period depends on what type of discharge you got the last time.
After a prior Chapter 7 discharge, you must wait eight years from the filing date of the earlier case before filing a new Chapter 7 that will result in a discharge. After a prior Chapter 13 discharge, the wait is six years from the filing date of that case. The six-year bar doesn’t apply if you paid 100 percent of unsecured claims in the earlier plan, or paid at least 70 percent and the plan was proposed in good faith as your best effort.3Office of the Law Revision Counsel. 11 USC 727 – Discharge
Both waiting periods run from the filing date of the earlier case, not from when the discharge was entered.
A shorter 180-day refiling bar can also apply if your previous case was dismissed rather than discharged. You cannot file again within 180 days if the court dismissed your case because you failed to appear or follow court orders, or if you voluntarily dismissed after a creditor sought relief from the automatic stay.4Office of the Law Revision Counsel. 11 USC 109 – Who May Be a Debtor
The Credit Counseling Requirement
Before you can file a Chapter 7 petition, you have to complete an individual or group credit counseling briefing from a nonprofit agency approved by the U.S. Trustee’s office.5Office of the Law Revision Counsel. 11 USC 109 – Who May Be a Debtor The briefing must fall within the 180-day period ending on the date you file. Sessions can be done by phone or online, usually last about an hour, and typically cost around $20 to $50. They cover your financial situation and alternatives to bankruptcy.
The agency issues a certificate of completion that you include with your initial filing. If the certificate is missing or the session falls outside the 180-day window, the court will dismiss your case.6Office of the Law Revision Counsel. 11 USC 109 – Who May Be a Debtor
Qualifying Isn’t the Same as Getting Relief
One last thing to check before you decide Chapter 7 is right for you. A discharge wipes out most unsecured debts, but several categories survive it, and if most of what you owe falls into those categories, filing may not accomplish much even when you qualify.7Office of the Law Revision Counsel. 11 USC 523 – Exceptions to Discharge The debts that typically survive include:
- Child support and alimony, and other domestic support obligations.
- Most student loans, unless you file a separate lawsuit within your bankruptcy case and prove that repaying them would cause you undue hardship.
- Recent income taxes. Taxes generally survive unless the return was due more than three years before filing, was filed on time, and the tax was assessed more than 240 days before the petition.8Internal Revenue Service. Declaring Bankruptcy
- Debts obtained by fraud, false pretenses, or a materially false written financial statement.
- Criminal fines and restitution.
- Debts for death or personal injury caused by driving under the influence.
- Consumer debts over $500 for luxury goods charged within 90 days of filing, and cash advances over $750 taken within 70 days, which are presumed non-dischargeable.7Office of the Law Revision Counsel. 11 USC 523 – Exceptions to Discharge
If most of your debt is on this list, passing the means test won’t give you the fresh start you’re looking for. Weigh that before you file.