How Do You Pass the Means Test for Chapter 7 Bankruptcy?

 Posted on January 09, 2025 in Bankruptcy

If you face significant debt, you may be wondering whether filing for Chapter 7 bankruptcy is the right option for you. One important thing to keep in mind is that to qualify for Chapter 7 bankruptcy, you must pass the "means test." You generally pass the means test if your income falls below the median Texas income. An experienced Fort Worth, TX attorney can advise you on whether you are likely to pass the means test to file Chapter 7 bankruptcy. 

What Is The Purpose of the Means Test?

The means test is a protective measure put in place to ensure that high-income individuals do not abuse Chapter 7 to discharge debts they may be able to pay. The means test measures your "means" or ability to pay back debtors and, at its core, is a formula used to determine if your income is low enough to qualify for Chapter 7 bankruptcy, which is the quickest, simplest, and most forgiving form of bankruptcy. 

How Do You Pass the Means Test?

There are three ways to determine if you pass the means test for Chapter 7 eligibility: either you are exempt, your income is low enough to qualify, or you have so many expenses that you nevertheless qualify even though your income is higher than the median Texas income.

Exemption From the Means Test

Some individuals qualify for Chapter 7 without taking the means test, such as certain military personnel and people whose business debt is higher than their personal debt. If you fall into any of these categories, you can file for Chapter 7 without passing the means test. 

Income Falls Within the Means Test Limits 

If you are not exempt, your next step is to determine if your gross income is within the means test limit. 

To do so, add up all qualifying income earned over the last six months. Relevant income sources include:

• Wages and salary

• Alimony payments received

• Money you received from any third party such as a spouse, partner, or roommate

• Rental income

• Interest and dividends

• Unemployment

• Retirement income

If that number falls at or below the median family income for Texas based on your household size, you have passed the means test. Otherwise, you will have to take a look at your expenses. 

Gross Income Is Too High

If your income is too high for Chapter 7, you can still pass the means test by deducting certain expenses from your income such as:

• House and car payments

• Overdue taxes

• Child care

• Insurance and other healthcare expenses

• Charitable Contributions

If you have no "disposable income" remaining after expenses, you pass the means test and qualify for Chapter 7. 

Contact a Fort Worth, TX Bankruptcy Attorney

If you want to know how you can qualify for Chapter 7 bankruptcy, an experienced Parker County, TX bankruptcy attorney can advise you. At Acker Warren P.C., we are here to represent you every step of the way in your bankruptcy proceeding, from determining if Chapter 7 is the best option for you and if you can pass the means test to qualify, to guiding you through the process. Call our offices at 817-752-9033 for a complimentary and confidential consultation today.