The Chapter 7 Means Test

Starting in November 2022, for a one-person household, the annual median income is $56,225. For a two-person household, the annual median income is $70,159. For a three-person household, the annual median income is $83,146. For a four-person household, the annual median income is $95,002.

If your gross income is less than the applicable amount, you pass the means test, and you can file a Chapter 7 bankruptcy case. However, if your gross income is higher than the median income, you do not automatically fail the test, and all hope of a Chapter 7 case is not lost.

An experienced Chapter 7 attorney knows how to determine your disposable income, which you might be able to use to pass the means test. Your lawyer will deduct qualified expenses from your gross income to determine your disposable income. Some costs are based on living standards for your area, while others can be your actual expense amounts. Some fees might include the following:

Mandatory paycheck deductions, tax obligations, insurance premiums, mortgage or auto loans, court-ordered payments, healthcare costs, childcare costs, required education costs of a disabled child, and expenses from caring for an older, ill, or disabled adult in your household.

You do not want to risk overlooking any possible expenses that you can deduct from your gross income to help you pass the means test. You will pass if your income minus qualified costs is lower than the reported median income. If your income is still too high, you will need to explore other options for debt relief, such as Chapter 13 bankruptcy.