Table of Contents
- How to Calculate the Means Test Step-by-Step (With Examples)
- Step 1: Gather Your Income Information
- Example:
- Step 2: Compare to Median Income in Your State
- Step 3: Deduct Allowed Expenses
- Step 4: Determine If You “Pass” or “Fail” the Means Test
- Example:
- Step 5: Consult a Bankruptcy Attorney Near You
- Why Accuracy Matters
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Navigating the bankruptcy Means Test can be daunting, but understanding this essential process is crucial for those considering Chapter 7 bankruptcy. This step-by-step guide will help you determine your eligibility and illustrate how a bankruptcy attorney near you can assist you in making informed decisions throughout this journey.
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Learn how to calculate the bankruptcy Means Test step-by-step to determine your eligibility for Chapter 7. This guide covers income assessment, expense deductions, and the importance of consulting a qualified bankruptcy attorney near you for personalized assistance.
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How to Calculate the Means Test Step-by-Step (With Examples)
If you’re thinking about filing for Chapter 7 bankruptcy, one of the first questions you’ll face is: “Do I qualify?” That’s where the bankruptcy Means Test comes in.
The Means Test is a formula used to determine whether your income is low enough to qualify for Chapter 7—or if you may be steered toward a repayment plan under Chapter 13 instead. While it sounds technical, calculating the Means Test is a straightforward process once you break it down.
In this post, we’ll walk you through the Means Test step-by-step, using simple language and clear examples so you can understand where you stand—and how a bankruptcy attorney near you can help you make the best decision for your situation.
💡 For every post in this series, scroll down to “Related Posts.”
Step 1: Gather Your Income Information
The first step is figuring out your “current monthly income” (CMI)—the average income you received over the last six calendar months before you file.
Include:
- Wages/salary
- Self-employment income
- Bonuses or commissions
- Rental income
- Child/spousal support received
- Unemployment or disability payments
Exclude:
- Social Security income
- Certain disability payments for war veterans
Example:
Let’s say you’re filing in August. You’d average your income from February through July.
If you earned $3,500/month from February to July:
- Total: $21,000 ÷ 6 = $3,500 CMI
Multiply your CMI by 12 to calculate your annual income ($3,500 × 12 = $42,000).
Step 2: Compare to Median Income in Your State
Now compare your annual income to your state’s median income limit based on your household size. If your income is below the median, you automatically qualify for Chapter 7.
State | Median Income (Household of 1) |
California | ~$70,000 |
Texas | ~$58,000 |
New York | ~$62,000 |
Florida | ~$56,000 |
(Note: These are rough estimates; actual figures change annually. Consult a bankruptcy attorney near you for current limits.)
If your income is above the median, move to Step 3.
Step 3: Deduct Allowed Expenses
Now calculate your disposable income by subtracting IRS-approved expenses from your monthly income. These include:
- Food, clothing, household supplies
- Transportation and vehicle operation costs
- Housing and utilities (based on national/local averages)
- Health insurance premiums
- Childcare and court-ordered payments
You also deduct:
- Secured debt payments (mortgage, car loan)
- Mandatory retirement contributions (in some cases)
The result is your monthly disposable income.
Step 4: Determine If You “Pass” or “Fail” the Means Test
If your disposable income is below a certain threshold, you pass the test and can file Chapter 7. If it’s too high, you may be required to file Chapter 13 instead.
Example:
- Monthly CMI: $4,500
- Allowed Expenses: $4,300
- Disposable Income: $200
If that $200 is below the threshold for your household size and state, you qualify for Chapter 7.
Step 5: Consult a Bankruptcy Attorney Near You
Even if you fail the Means Test on paper, you may still qualify based on special circumstances—like recent income loss, medical costs, or other hardships. A bankruptcy lawyer near you can help navigate these exceptions.
They can:
- Accurately calculate expenses
- Identify deductions you may have missed
- Present a compelling case if you’re borderline
Why Accuracy Matters
A mistake on your Means Test can result in:
- A denied Chapter 7 filing
- Dismissal of your case
- Delays or additional court scrutiny
That’s why it’s essential to work with a qualified bankruptcy attorney near you who can ensure your eligibility is clearly and properly documented.
ReferU.AI helps you find an experienced bankruptcy attorney near you who understands the Means Test and how to structure your filing to maximize your chances of relief.
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