Table of Contents
- Income Thresholds, Expense Allowances, and Common Pitfalls
- What Are Income Thresholds?
- Example Median Incomes (2024):
- What Are Allowable Expenses?
- Common Pitfalls in the Means Test
- 1. Misreporting Income Timing
- 2. Forgetting Non-Wage Income
- 3. Missing Allowable Deductions
- 4. Overstating Ineligible Expenses
- 5. Failing to Adjust for Future Income Changes
- Why Precision Matters
- ReferU.AI: Find Help from a Bankruptcy Attorney Near You
Ready to Publish
Ready to Publish
Author
OG Image (1200x630)
Excerpt
Navigating the bankruptcy Means Test can be challenging, especially when it comes to understanding income thresholds and allowable expenses. This guide highlights key components and common pitfalls to help you prepare effectively, ensuring that you have the support of a qualified bankruptcy attorney near you for a smoother process.
Meta Description
Understand the complexities of the bankruptcy Means Test, including income thresholds and allowable expenses, to avoid common pitfalls. This guide highlights essential insights for filing under Chapter 7 or Chapter 13, emphasizing the importance of working with a bankruptcy attorney near you for accurate reporting and successful case approval.
Slug
bankruptcy-law-guide/eligibility-means-test-bankruptcy-qualify/income-thresholds-expense-allowances-bankruptcy-means-test
Alt Image Text
Flat vector illustration showing income threshold charts, expense icons, and common pitfalls in the bankruptcy Means Test, with a bankruptcy attorney near you guiding a person through calculations and deductions.
Related Posts
Global Tags
Sub-item
Hide in Main Feed
Hide in Main Feed
Post Id
1539
Updated
Mar 30, 2025 06:20 PM
Featured
Featured
Hide CTA
Hide CTA
Hide Cover
Hide Cover
Income Thresholds, Expense Allowances, and Common Pitfalls
If you’re preparing to file bankruptcy, understanding how the Means Test actually works is crucial to avoiding surprises, delays, or even denial of your case. While the process may look like a basic income vs. expense formula, it’s filled with nuances—and small mistakes can cost you big.
In this guide, we’ll dive into the core components of the Means Test: income thresholds, allowable expenses, and the most common pitfalls that trip up filers. Whether you’re planning to file under Chapter 7 or Chapter 13, this post will help you navigate the test with clarity—and understand why a bankruptcy attorney near you is essential to get it right.
💡 For every post in this series, scroll down to “Related Posts.”
What Are Income Thresholds?
The Means Test compares your average monthly income over the last six months against your state’s median income level, based on household size. This determines if you qualify for Chapter 7 or if you’ll need to consider Chapter 13 instead.
Example Median Incomes (2024):
Household Size | California | Texas | Florida |
1 Person | ~$70,000 | ~$58,000 | ~$56,000 |
2 People | ~$90,000 | ~$74,000 | ~$72,000 |
3 People | ~$100,000 | ~$80,000 | ~$78,000 |
If your annual income is below your state median, you typically qualify for Chapter 7 automatically.
If your income is above the median, you move to the second stage—deducting allowed expenses to calculate disposable income.
What Are Allowable Expenses?
The IRS and bankruptcy courts set standards for reasonable living expenses, which can include:
- Housing and utilities (based on local standards)
- Food, clothing, and household items
- Transportation (fuel, maintenance, public transit)
- Health insurance and medical costs
- Childcare or dependent care
- Life insurance premiums
- Secured debt payments (mortgage, car loans)
- Court-ordered payments (child support, alimony)
Some expenses are based on national or regional averages, not your actual spending. This can surprise many filers who pay more than what’s “allowed.”
Common Pitfalls in the Means Test
1. Misreporting Income Timing
The Means Test uses income from the last six calendar months, not your most recent paycheck. Missing this detail leads to inaccurate averages.
2. Forgetting Non-Wage Income
You must include things like:
- Rental income
- Alimony received
- Business or side hustle income
- Bonuses or commissions
3. Missing Allowable Deductions
Many people overlook deductions they’re entitled to, including:
- Health insurance premiums
- Transportation expenses
- Court-ordered payments
A bankruptcy attorney near you can help identify every deduction you qualify for to lower your disposable income.
4. Overstating Ineligible Expenses
Luxury spending, voluntary retirement contributions, and private school tuition may not be deductible. Including these incorrectly can raise red flags with trustees.
5. Failing to Adjust for Future Income Changes
The test is based on your past income, but future changes (like job loss or reduced hours) might justify a Chapter 7 filing. A bankruptcy lawyer near you can help argue for special circumstances.
Why Precision Matters
The Means Test is technical—and your eligibility, discharge, and case approval depend on accurate reporting. Mistakes can lead to:
- Case dismissal
- Forced conversion to Chapter 13
- Delays or objections from the trustee
That’s why working with a bankruptcy attorney near you isn’t just helpful—it’s critical.
ReferU.AI: Find Help from a Bankruptcy Attorney Near You
Whether you’re trying to qualify for Chapter 7 or need help structuring a Chapter 13 plan, ReferU.AI connects you with the right bankruptcy lawyer near you who understands income thresholds, expense rules, and the nuances that matter most.
Written by
