Bankruptcy Chapter 7 Means Test

Find out if you have to take the Bankruptcy Chapter 7 Means Test...
and if you do ...
how to take it and pass

        The Means Test came about during the Bankruptcy Reform Act (BARF) in 2005.  The test was created to determine whether debtors should simply be allowed to eliminate their debts in Chapter 7, or be made to pay a significant amount under a Chapter 13 repayment plan if they can afford it.

You may not have to pass a bankruptcy Chapter 7 Means Test if your income for the 6 months before filing is less than the median income in your state.  So check this first before going any further so you don't waste your time going down the wrong path.  The means test is known to be a tedious exercise, so don't go through with it if you don't have to!
Check your state's median income here:  Median Income - All States

Again, if your income is below your state's median ...congratulations ... you may proceed to file Chapter 7.  If your income is above your state's median, you may still qualify to file for Chapter 7 if you pass the Means Test (see below).  If you fail the Bankruptcy Chapter 7 Means Test, you have the option of filing a Chapter 13 repayment plan.   If you're unable to afford your Chapter 13 payments, you may be eligible to file a Chapter 7 down the road.  The important thing is, you have options.  Please find an experienced att

If your income for the last 6 months before filing is above your state's median, here's how to take the Bankruptcy Chapter 7 Means Test

Calculate Your Income

You have to calculate your average gross monthly income for the last 6 months prior to filing Chapter 7 bankruptcy.  Annualize this number, or multiply it by 12 to get the yearly amount.  Please note:  the 6-month period, for calculation purposes, ends on the last day of the month directly preceding your bankruptcy filing.  For example, if you file in mid-September, you will average your income for March, April, May, June, July, and August.

What to Include in your Income Calculation:

  • Wages, salary, bonuses, commissions, and fees
  • Tax Refunds
  • Net Rental Income
  • Retirement Income
  • Alimony or child support payments
  • Any funds that you regularly receive from others for your living expenses (this includes money from your spouse if you don't file bankruptcy jointly)
  • Insurance payments and reimbursements from health and accident insurance plans
  • Compensation for injury or illness
  • Inheritance and gifts
  • Scholarships and educational benefits
  • Parthership Income (your share)
  • Net income from business deals and asset sales
  • Prizes and awards
Important to Note:  
  • Your spouse's income is included whether or not you file bankruptcy jointly.  There are 2 exceptions to this:  1)  A non-filing spouse's income does not count if you're living separately or are legally separated.  2)  Even if your non-filing spouse's income is not included, you will need to include any amount that they contribute to household expenses.
  • Withholdings from your wages along with Income Taxes are deducted as expense items so you must include them first in your gross income calculation.

What NOT to Include in your Income:

  • Payments to you if you were a victim of war crimes or crimes against humanity
  • Payments to you if you were a victim of terrorism (ex:  victims from the terrorist attacks on September 11, 2001)
  • Social Security Benefits  (Please check with your attorney regarding Unemployment Benefits if you are or did receive them in the last 6 months)

Deduct Your Expenses

The Bankruptcy Chapter 7 Means Test allows deductions from income for the listed items below.  The guidelines are a little confusing and sometimes contradictory, so please enlist an experienced and qualified attorney to help you navigate through them.

1.  Amounts allowed under the IRS National and Local standards, regardless of your actual expenses:

Living Expenses:
  • Food
  • Housekeeping supplies
  • Personal care services such as haircuts, etc, plus an additional $100/month for discretionary spending, with $25 for every additional family member.  
The amounts allowed are based on gross monthly income and family size, adjusted yearly.

Housing expenses:
  • Rent or Mortgage Interest
  • Maintenance and Repair
  • Property Raxes
  • Home or Renter's Insurance
  • Parking
  • HOA Dues
  • Condo Fees
  • Utility expenses (water, electricity, gas, trash collection, fuel oil, bottled gas, coal
Transportation Expenses:
  • Car Insurance
  • Car Lease Payments
  • Fuel
  • State and Local Registration
  • Maintenance
  • Parking Fees
  • Toll-Fees
  • Driver's License Fees
  • Public Transportion
  • Required Vehicle Inspection

2.  Necessary or Unavoidable Expenses  Allowed by the IRS:

  • Taxes
  • Insurance
  • Mandatory Payroll Deductions
  • Court-Ordered Payments
  • Childcare Expenses
  • Healthcare Expenses

3.  Allowed Expenses specified by BARF:

  • Expenses towards support and care of family members in need
  • Expenses for education up to $125/child
  • Health and Disability insurance
  • Contributions to Health Savings Accounts
  • Expenses to protect family from domestic violence
  • Charitable contributions
  • Necessary home energy costs above and beyond the IRS standards
  • Necessary expenses for food and clothing above what's allowed under the IRS standards

Bankruptcy Means Test Calculator

If you'd like to go ahead and plug in all your numbers and see if you pass, here's a bankruptcy Chapter 7 Means Test  Calculator.  Enter your zip code and continue from there.

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Please note that the information on this website is not a substitute for legal advice.  It is for informational purposes only.  Please read our Disclaimer page.   We strongly recommend that you consult with an experienced bankruptcy attorney for your particular situation.