What Is the Means Test and How Does it Apply to Chapter 7 Bankruptcy

If you're considering filing for Chapter 7 bankruptcy, you've likely come across the term "means test." But what exactly is the means test, and how does it impact your ability to file for Chapter 7 relief?

In this article, we’ll break down what the means test is, why it matters, and how it determines whether you qualify for Chapter 7 bankruptcy.

What Is the Chapter 7 Means Test?

The means test is a financial evaluation used to determine if an individual or household qualifies for Chapter 7 bankruptcy, which allows for the discharge of most unsecured debts (like credit cards, medical bills, and personal loans).

Introduced as part of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005, the means test was designed to prevent people with higher incomes from abusing the Chapter 7 process. It essentially checks whether you truly can’t afford to pay back your debts.

How the Means Test Works

The means test involves two main steps:

Step 1: Compare Your Income to the Median

The first step is to compare your average monthly income over the last 6 months to your state’s median income for a household of your size.

• If your income is below the state median, you automatically pass the means test and qualify for Chapter 7.

• If your income is above, you move on to Step 2.

Step 2: Analyze Disposable Income

In this step, you’ll calculate your disposable income by deducting allowed expenses from your monthly income. These include:

• Housing and utility costs

• Food and clothing

• Medical expenses

• Car payments

• Taxes and insurance

• Other necessities

If your disposable income is too high, the court may presume that you have enough money to repay your debts through a Chapter 13 repayment plan instead of Chapter 7.

Why the Means Test Matters

Passing the means test is essential if you want to file under Chapter 7. Chapter 7 bankruptcy offers the fastest and most complete form of debt relief, typically discharging your qualifying debts within a few months.

Failing the test doesn’t mean you’re out of options—it just means you may need to consider Chapter 13 bankruptcy, where you repay a portion of your debts over 3–5 years.

Common Questions About the Means Test

What if I’m unemployed?

If you’ve had no or low income over the past 6 months, you’re likely to pass the means test.

Do all debts get wiped out in Chapter 7?

No. Some debts, like student loans, child support, and recent taxes, are generally non-dischargeable.

Can I skip the means test?

Some individuals—like disabled veterans or those with primarily business debts—may be exempt from the means test.

Final Thoughts

The means test is a critical part of the Chapter 7 bankruptcy process. While it might seem complicated, it’s designed to ensure that bankruptcy relief is available to those who truly need it.

If you're unsure whether you qualify or how to navigate the process, it's a good idea to consult with a bankruptcy attorney or use a reputable online means test calculator.

Need help determining if you qualify for Chapter 7?

Reach out to a qualified bankruptcy professional today to review your options and start your journey to financial freedom.