How to Determine Eligibility for Chapter 7 Bankruptcy Under the Means Test
April 7, 2025
When folks in Oklahoma consider filing for Chapter 7 bankruptcy, they often ask how to figure out if they qualify.
The process involves taking what’s known as the means test, which helps determine if someone’s income is low enough to file under Chapter 7. This test isn’t optional—it’s a required step for most people filing for Chapter 7 bankruptcy.
At Deborah Brooks & Associates, P.C., I regularly walk Western Oklahoma clients through this process to help them decide if Chapter 7 might be an option for them. Below, I’ll explain how the means test works, how income and expenses factor in, and what to expect when taking the test.
Why Does the Means Test Exist?
The means test became part of bankruptcy law with the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Lawmakers wanted a way to stop higher-income filers from choosing Chapter 7 when they might have been able to repay some debts under Chapter 13 instead.
The means test helps separate those who truly can’t pay their debts from those who may have some ability to do so. If you’re thinking about Chapter 7, this test will likely be the first thing we review at our initial consultation.
Looking at Household Income for the Means Test
The first part of the means test compares your household income to the median income for households of the same size in Oklahoma. The U.S. Department of Justice regularly updates these figures, so they do change over time.
If your income falls below the median, you pass the means test right away. That’s where the analysis can stop, and you can likely move forward with your Chapter 7 case.
If your income is higher than the median, that doesn’t automatically mean you can’t file under Chapter 7. It just means we’ll need to complete the rest of the means test, which looks at your expenses and disposable income.
What Counts as Income for the Means Test?
Income for the means test includes more than just your regular paycheck. Some of the income sources that count include:
Wages, salaries, and bonuses
Income from a business or rental property
Pension and retirement income
Unemployment benefits
Spousal or child support you receive
It’s important to note that Social Security benefits generally don’t count as income for the means test. That’s one small piece of good news for retirees or disabled individuals considering bankruptcy.
Calculating Household Size Correctly
Household size can also affect the means test. When we calculate this, we count everyone who regularly lives in your home, not just immediate family members. This can include:
Children, including stepchildren or foster children
Elderly parents who live with you
Other relatives or individuals you support financially
The larger your household, the higher the median income figure you’re allowed to have before failing the initial part of the means test. This is why we take care when calculating household size—it directly affects eligibility.
Moving to the Second Part of the Means Test
If your income exceeds the median for Oklahoma, the next part of the test looks at your expenses. This is where we go line by line through allowable expenses to figure out how much disposable income you have left each month.
The court uses both national and local standards for certain expenses, like food, clothing, and housing. This means you might not get to deduct your actual expenses in some categories. Instead, the means test assigns a fixed amount based on government guidelines.
Other expenses, like medical bills, childcare, or taxes, can be deducted based on what you actually pay. This section of the means test can get very detailed, and this is where working with a bankruptcy attorney makes a real difference.
Analyzing Disposable Income
Once we account for all allowable expenses, what’s left is considered disposable income. If you have little or no disposable income, you might still qualify for Chapter 7.
However, if your disposable income is high enough that you could repay a meaningful portion of your debts over time, the means test may indicate you should file under Chapter 13 instead. This part of the means test isn’t subjective—it’s math. That’s why it’s so important to have accurate income and expense records ready when preparing for bankruptcy.
Examining the Role of Presumptions of Abuse
If the means test shows you have too much disposable income, the court presumes filing for Chapter 7 would be abusive. That doesn’t mean you absolutely can’t file under Chapter 7, but it does mean the court will scrutinize your case more closely.
In some cases, we may be able to demonstrate special circumstances that justify Chapter 7 even if the means test creates a presumption of abuse. For example, unexpected medical costs, job loss, or other unusual hardships might warrant an exception.
The Importance of Timing When Taking the Means Test
Timing can significantly affect the means test. Because it looks at income over the last six months, filing in one month versus the next could change the outcome if your income recently changed.
For example, if you lost your job or experienced a pay cut, waiting a month or two might help you qualify for Chapter 7. We’ll review your full financial timeline to figure out the best filing strategy based on your income history.
Reviewing Income for Households With Irregular Earnings
If your income fluctuates, the means test can be a little trickier. This applies to seasonal workers, commission-based employees, or small business owners.
In these cases, we calculate an average over the past six months. If you had an unusually high month that skews the average, we might talk about whether waiting a bit could help bring that average down.
How the Means Test Affects Married Couples
Married couples who file jointly have to complete the means test based on combined income. Even if only one spouse is filing, the other spouse’s income is usually factored in as well.
There are exceptions for separated couples, but for most married couples living together, we count both incomes. This sometimes creates challenges when one spouse earns significantly more than the other.
Working With a Bankruptcy Attorney to Complete the Means Test
As a bankruptcy attorney in Oklahoma, I can’t overstate how important accuracy is when filling out the means test. Small mistakes in income reporting or missing expenses can completely change the results.
During our initial meeting, we’ll go over your income sources, household size, and typical expenses to make sure the numbers are right. I’ll also explain which documents you’ll need to support those numbers when you file.
What Happens If You Don’t Pass the Means Test
If you don’t pass the means test, Chapter 7 might not be an option. That’s not the end of the road, though. We can look at Chapter 13 instead, where you pay some of your debts over three to five years.
Chapter 13 works for many people who have higher incomes, particularly if they need to catch up on mortgage payments or car loans. We’ll review both options and discuss which one fits your situation best.
Revisiting the Means Test If Circumstances Change
If you’re not eligible for Chapter 7 today, that doesn’t mean you won’t be in the future. Changes in income, household size, or expenses could shift the results the next time we run the test.
That’s why I recommend touching base periodically if you’re considering bankruptcy but aren’t ready to file yet. That way, we’ll know if a future filing could look different based on updated circumstances.
Key Takeaways About the Means Test
To recap, here’s what’s most important to know about the means test:
It’s required for most Chapter 7 bankruptcy filers.
It compares your income to the Oklahoma median for your household size.
If your income exceeds the median, you’ll need to show you have little disposable income left after allowable expenses.
If you fail the means test, Chapter 13 may still be an option.
For many people, the means test feels like the most technical part of filing for Chapter 7. As a bankruptcy attorney, I help clients work through this process every day so they understand what the numbers mean and what options they have.
Call Us Today to Get Started
If you have questions about whether Chapter 7 might be an option for you, I encourage you to contact my office so we can review your specific situation together in Western Oklahoma. Contact Deborah Brooks & Associates, P.C. today to get started.