How the bankruptcy means test determines Chapter 7 eligibility

 Posted on December 00, 0000 in Chapter 7 Bankruptcy

The bankruptcy means test is what decides if you are eligible for Chapter 7 bankruptcy. The goal is to make sure Chapter 7 is available to people who genuinely can't repay their debts, not those who could manage a payment plan under Chapter 13.

If you're considering bankruptcy in 2026, understanding the means test is the right first step. Our Hyattsville, MD bankruptcy lawyer can walk you through exactly where you stand.

What Is the Bankruptcy Means Test?

The bankruptcy means test was codified in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) to prevent higher-income filers from using Chapter 7 to wipe out debts they could realistically pay back. Before BAPCPA, almost anyone could file for Chapter 7. Now, your income and expenses have to meet specific criteria.

The test has two parts. First, it checks your average monthly income over the six months before you file. Second, if needed, it subtracts certain allowed expenses from that income to see how much you'd have left over to pay creditors.

What Counts as Income for the Bankruptcy Means Test?

The means test does not just look at your paycheck. It includes most money coming into your household, such as:

• Wages, salaries, and tips
• Business income (after expenses)
• Rental income
• Pension and retirement payments
• Regular contributions from others toward household expenses

Some things are not counted, including Social Security benefits and certain payments to victims of war crimes or terrorism under 11 U.S.C. § 101(10A).

How Does Maryland's Median Income Affect Your Eligibility for Chapter 7 Bankruptcy?

Once your monthly income is calculated, it's compared to Maryland's median household income for a home matching the size of yours. The U.S. Trustee Program updates these figures periodically. As of 2025, Maryland has some of the highest median income thresholds in the country, which means many Maryland filers clear the first part of the test without needing to go further.

If your income falls below the median, you qualify for Chapter 7 and don't need to complete the rest of the means test. If your income is above the median, you move on to the second part of the test.

What Happens If Your Income Is Too High?

Passing the second part of the means test depends on your allowable expenses. The IRS publishes standard expense amounts for things like food, clothing, and transportation. You're allowed to deduct these amounts, along with actual costs for housing, taxes, health care, and certain secured debts, from your monthly income.

What's left after those deductions is called your "disposable income." If that number is low enough under the formula set out in 11 U.S.C. § 1325(b), you can still qualify for Chapter 7. If it's too high, the court may determine that Chapter 13, a structured repayment plan, is more appropriate for your situation.

What If the Math Is Close?

If your income is just above the median or your disposable income calculation is borderline, the outcome isn't always clear-cut. An experienced bankruptcy attorney can review whether any deductions were missed or miscalculated, since those details can change the result entirely.

What Are Common Reasons People Fail the Bankruptcy Means Test?

A few situations tend to trip people up:

• Using the wrong six-month window for income averaging
• Forgetting to include a household member's income
• Overlooking legitimate deductions that could lower disposable income
• Filing too soon or too late relative to a job loss or income change

Timing matters. If you recently lost your job or took a pay cut, waiting a month or two before filing could shift your average income significantly and improve your chances of qualifying.

Does the Bankruptcy Means Test Apply to All Chapter 7 Filers?

The means test primarily applies to individuals with primarily consumer debts, meaning debts taken on for personal, family, or household purposes. If most of your debt comes from a business you operated, the means test may not apply to your case at all. This is a distinction worth clarifying early, because it changes the analysis entirely.

Contact Our Greenbelt, MD Bankruptcy Attorney Today

If you're trying to figure out whether you qualify for Chapter 7, you don't have to work through the math alone. At The Law Office of Donald L. Bell, our Hyattsville, MD bankruptcy lawyer has more than 20 years of experience helping clients navigate the bankruptcy process and currently serves as the chair of the National Bar Association's Bankruptcy section.

We handle Chapter 7 cases on a flat fee basis, so there are no surprises when it comes to legal costs. With hands-on guidance from start to finish and a particular focus on helping clients save their homes, we are ready to review your situation and help you understand your options. Call 301-614-0535 to get started.