What Are the Chapter 7 Bankruptcy Income Limits?

What Are the Chapter 7 Bankruptcy Income Limits?

There’s no single income limit that applies to everyone filing Chapter 7 bankruptcy. Instead, the court uses a process called the means test to figure out whether you qualify. This test has two steps.

To figure out if you qualify for Chapter 7 bankruptcy, you’ll first compare your income to your state’s median income for a household of your size.

If your income is below your state’s median, you automatically pass the means test, and you don’t need to move on to step two. That means you’re likely eligible to file Chapter 7 and to use Upsolve’s free filing tool.

💡Income = the average of your most recent six months of income.

📰 Here’s the good news: About 90% of people who file for bankruptcy qualify for Chapter 7 based on income alone, without needing to complete the second part of the means test, according to research shared by Debt.org.

Do You Qualify for Chapter 7 Based on Your Income?

The chart below shows the most recent state median income limits by household size.

🔎 To use it, find your state and household size, then compare your average monthly income from the past six months to the median monthly income listed. If your income is lower, you likely meet the income requirement to file Chapter 7.

Median Monthly Income Limits by Household Size and State

💡 If your household size is larger than four people, click the link for your state to access a more detailed chart.

Why Are There Income Limits for Chapter 7?

Chapter 7 wipes out many types of debt without requiring you to pay creditors back. Because it offers such broad relief, Congress added income limits in 2005 to make sure it’s used by people who truly can’t afford to repay their debts.

The idea is simple: If someone earns enough to make monthly payments toward their debts, they may be a better fit for Chapter 13 bankruptcy, which includes a repayment plan. The means test helps the court decide who qualifies for Chapter 7 based on income and necessary living expenses.

What Is the Bankruptcy Means Test?

The means test is a calculation the court uses to figure out whether you qualify for Chapter 7 bankruptcy. It looks at your income and living expenses to determine if you can afford to repay any of your debts.

There are two parts to the test:

1️⃣ Part 1: Income Comparison

This compares your average monthly income from the past six months to your state’s median income for a household of your size. If your income is below the median, you pass the means test and can file Chapter 7.

📚 Term to know: Six-month lookback period. This refers to the six full calendar months before you file for bankruptcy, which the court uses to calculate your average monthly income for the means test.

2️⃣ Part 2: Expense and Disposable Income Review

If your income is above the median, the test moves on to your monthly expenses. After deducting allowed expenses, the court checks whether you have any money left over — called disposable income — that could be used to repay your debts.

Most people who qualify for Chapter 7 pass the means test based on income alone. 

👉 Want a deeper dive? Check out our full guide to the bankruptcy means test.

What Paperwork Do You Need To Complete the Means Test & File Chapter 7?

If you’re filing Chapter 7 bankruptcy, you’ll need to fill out several forms that show the court your financial situation. The means test is just one piece of the full paperwork.

There are two official forms you’ll need for the means test specifically:

• Official Bankruptcy Form 122A-1: This is the Statement of Your Current Monthly Income. It’s where you calculate your average income over the past six months.

• Official Bankruptcy Form 122A-2: This is the Means Test Calculation form. If your income is over the state median, this is where you list your allowable expenses for the second part of the test.

Other required bankruptcy forms may also help you as you figure out your income and expenses, including:

• Forms 106I and 106J: These forms list your current monthly income and expenses, including what you spend on housing, food, and transportation.

• Form 107 (Statement of Financial Affairs): This gives the court a full picture of your financial history.

• Schedules of assets and liabilities: These forms show everything you own and everything you owe.

• Evidence of payment: You’ll also need to provide pay stubs or other proof of income from the 60 days before you file.

• Certificate of credit counseling: This shows you completed the required counseling course within 180 days before filing.

💡 Chapter 13 has its own means test forms, which can be accessed for free from the U.S. Courts website.

✨ If you’re using Upsolve, our free filing tool will help you complete the required forms based on your answers. And we’ll include instructions for how to file them with the court. It just takes two minutes to see if you qualify to file with Upsolve.

What if You Don't Pass the Means Test?

If the means test shows that your income is greater than the allowed expenses, you may not be eligible to file Chapter 7 bankruptcy. 

🗓️ If your income has been higher than usual in the past six months or your expenses are lower than usual, it might just be a timing issue. If so, you can consider filing for Chapter 7 later. 

If you expect to continue to have disposable income, you probably want to look into Chapter 13 or other debt relief options, like a debt management plan or debt settlement, instead.

How Is Income Calculated for Bankruptcy?

The court looks at your average gross income over the six full months before you file. 

So for example, if you file in July, your income from January to June is used to determine your income eligibility.

💡 Gross income is the total amount of money you earn before taxes and other deductions are taken out.

When calculating your gross income, be sure to include all of the sources below if they’re relevant to your situation:

• Wages

• Tips

• Alimony

• Child support

• Side gigs

• Rental income

‼️ Social Security benefits (SSI and SSDI) don’t count toward this total. But these benefits will be listed elsewhere in your bankruptcy forms. If your only source of household income is SSI or SSDI, you pass the Chapter 7 means test without having to do any math.

🔎  For a full breakdown, check out our step-by-step guide to the means test.

What if Your Income Is Too High?

If your income is above the median, things get more complicated. You’d have to move on to the second part of the means test, which factors in your living expenses to see if you still qualify.

👉 You’ll need to show that, after covering necessary costs like housing, food, and healthcare, you don’t have enough money left over to pay back even a portion of your debts. 

If the calculations show that you do have some disposable income after accounting for expenses, you may be required to file Chapter 13 bankruptcy instead. Chapter 13 includes a 3–5-year debt repayment plan.

🤝 Because this is more complex, Upsolve isn’t able to help with these cases directly. But we can refer you to an experienced bankruptcy attorney near you for a free consultation. They can usually tell you at the consultation whether you qualify to file Chapter 7 or not.

Are There Exceptions to the Income Limits?

Yes. If most of your debt is business-related or you’re an active-duty service member or disabled veteran, you may not need to take the means test. 

You’ll need to fill out and file a special form (Official Form 122A-1Supp: Statement of Exemption from Presumption of Abuse), but the income limits won’t apply the same way.

Here’s a little more information about these two situations.

Exemption for Business Debt

If more than 50% of your debt is considered non-consumer debt, you’re automatically exempt from the means test calculation. 

Non-consumer debt is also called business debt because it’s incurred with a business or profit motive. If you’re not sure if you have business debt, consider speaking to a bankruptcy attorney about your situation and the types of debt you have. 

Exemption for Qualifying Service Members and Veterans

Disabled veterans, reservists called to active duty, and members of the National Guard don't have to count compensation connected to their service as part of the bankruptcy means test. This protection was expanded in 2019 when Congress passed the HAVEN Act.

Anyone who qualifies for one of these exceptions to the bankruptcy income limits has to file a Statement of Exemption from Presumption of Abuse Under § 707(b)(2) instead of their bankruptcy means test form. This form lets the bankruptcy court know that you’re not subject to the income limits.

What Expenses Are Included in the Means Test?

If your income is higher than the median for your state, you’ll need to complete the second part of the means test. This part looks at your monthly expenses to figure out if you still qualify for Chapter 7 based on how much disposable income you have left after covering basic needs.

There are four main types of expenses that can be deducted:

1. Specific living expenses based on IRS-established national standards (not your actual spending)

2. Payments on secured debts (like a home or car loan) and priority debts (like taxes or child support)

3. Actual monthly expenses for certain items

4. Chapter 13 administrative costs (even if you’re trying to file Chapter 7)

If, after these deductions, there isn’t enough left over to pay a meaningful amount toward your unsecured debts (usually at least 25% over five years), you may still qualify for Chapter 7.

Here’s more information on each of these expense categories.

Standard Living Expenses Based on IRS Guidelines

Some categories are based on national and local standards set by the IRS. These are preset amounts, not your actual spending.

These expenses are specifically for:

• Food, clothing, household supplies, and personal care items

• Housing and utilities

• Out-of-pocket healthcare expenses

• Transportation

Payments on Secured and Priority Debts

If you’re keeping property like a home or car, the monthly payments on those loans can usually be deducted as expenses in part two of the means test. 

💡 Car loans and home loans are usually referred to as secured debts because the collateral “secures” the loan.

You can also deduct payments on certain non-dischargeable debts, like recent income taxes or child support. These are usually referred to as priority debts.

Actual Monthly Expenses

Some necessary costs can be deducted based on what you actually spend each month — especially if they’re higher than the standard amounts allowed by the IRS. To count, these expenses must be reasonable, necessary, and documented.

This can include things like:

• Childcare or babysitting costs

• Health insurance premiums

• Court-ordered child or spousal support

• Mandatory retirement contributions

• Education costs required for your job

• Ongoing medical expenses that exceed the standard allowance

You may also be able to deduct more than the IRS standard in certain categories if you can show that your actual expenses are both higher and justified. 

Chapter 13 Administrative Costs

Since the means test compares your situation to what you’d pay in a Chapter 13 repayment plan, you’re allowed to deduct estimated administrative costs for a Chapter 13 case, even if you’re filing under Chapter 7.

👉 Reminder: Many filers who make it to this step choose to speak with a bankruptcy lawyer, since this part of the test can get technical.

What Happens After the Means Test?

If you pass the means test and decide to move forward with Chapter 7 bankruptcy, the next steps involve filling out the rest of your bankruptcy forms and filing them with the court. Before you do that, you’ll also need to take a required credit counseling course.

After you file your case, you'll attend a short meeting of creditors (also called a 341 meeting) with a bankruptcy trustee. The bankruptcy trustee is a neutral third party who will ask questions about your finances and ensure the process is fair.

You’ll also need to complete a second required class. This a brief financial management course to help you move forward after bankruptcy.

Most people receive their bankruptcy discharge within a few months of filing. The discharge is the official court order that wipes out your eligible debts (e.g. credit card debt, medical bills, personal loans, payday loans, and more).

For more information, read our popular 10-step guide to filing bankruptcy for free.