The Coach SpaceThere were 276,126 cases of bankruptcy filed during the initial six months of 2025. This data, which came from bankruptcy data platform Epiq AACER, indicates that there was an increment of 10% against the 251,069 total bankruptcy filings reported during the previous year.
As you start preparing bankruptcy papers, you would need to study the different classes of bankruptcy that you can use. Filing for Chapter 7 tends to be most effective, as it allows an individual to start from scratch by removing most debts that were dischargeable in the case of unsecured debts such as credit card bills, medical treatment and personal credit.
Keep in mind that not everyone can opt for this protection since several things do not allow them to declare Chapter 7 bankruptcy. The “means test” benchmark is cited as one of the reasons that may hinder an individual from declaring a Chapter 7 bankruptcy.
What is the Chapter 7 bankruptcy means test? The process of deciding upon approval or denial is known as the Chapter 7 Bankruptcy Means Test. This test is for individuals who earn more than the average standard in their state.
A bankruptcy discharge from filing for bankruptcy protection is a right that can be denied or that can adversely affect a person for some reason. Sometimes, this kind of outcome occurs when a person cannot complete the required legal processes.
The Court may also terminate court proceedings in case it finds a debtor having sufficient disposable income to settle the debts under a Chapter 13 plan.
If you make more money than the specified standard, the means test further focuses in on how much of such reserve is left after accommodation of these basic living expenses to determine whether you are capable of affording to service your debts under a Chapter 13 plan as opposed to Chapter 7.
Let’s discuss the elements that could disqualify or contribute to an individual’s failure in a Chapter 7 bankruptcy means test.
Failing the Means Test
The mean test, as introduced by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, exists as the primary screening method for applicants who wish to declare Chapter 7 bankruptcy.
Comparing the monthly average earnings of the person for the six months prior to their time of bankruptcy filing and the median income for a family of the same number of members in the state is the first stage. You pass the means test for Chapter 7 if your six-month average income falls below the state median for your household size.
The process moves to the second step when your income exceeds the median, which calculates disposable income through allowable expense deductions from your total income. The calculation of allowable expenses uses IRS national and local standards to determine costs for housing, food, transportation, healthcare, childcare, and mandatory payments.
The court assumes abuse has occurred when your projected disposable income over 60 months reaches an amount that allows you to maintain a viable Chapter 13 repayment plan. This situation leads to case dismissal.
The median threshold does not serve as an automatic basis for disqualification. The second step of the process passes many above-median filers if their expenses are proven to have used up their extra income.
Two categories of debtors are exempt from the means test entirely: disabled veterans whose debts were primarily incurred during active duty or homeland defense service and debtors whose debts are mainly business-related rather than consumer debts.
Prior Bankruptcy Filings and Waiting Periods
According to the law firm website https://www.steelebankruptcy.com/, the main benefit of Chapter 7 is having your debts discharged, a process that might take only three to six months from when you start.
The filing time creates an absolute disqualification barrier. The Bankruptcy Code requires mandatory waiting periods, which must be observed after discharge dates before a new Chapter 7 case can be initiated.
- A previous Chapter 7 discharge must be followed by an eight-year waiting period before another Chapter 7 discharge can be granted.
- Four years must have passed from a previous Chapter 13 discharge before a Chapter 7 discharge can be granted.
- Six years must have passed since a previous Chapter 7 discharge before a Chapter 13 discharge can be granted. An exception can be granted if the prior Chapter 7 plan paid at least 70 percent of allowed unsecured claims.
The waiting time starts counting from the discharge date until the opening of the upcoming case. You can still file a new case after the windows close but your case will not receive a discharge from the court. A Chapter 7 case becomes unworthy of pursuit when the case lacks discharge eligibility.
Prior Case Dismissal for Cause
The law prohibits you from opening new bankruptcy proceedings for 180 days after your prior bankruptcy case was dismissed as a result of intentionally failing to appear and not following court orders. An individual will have an invalid bankruptcy declaration if their previous case was dismissed as a result of the creditor requesting automatic stay relief.
Courts are authorized to dismiss Chapter 7 cases and prohibit individuals from refiling their cases when they determine that a case constitutes an inappropriate use of bankruptcy proceedings.
Courts usually find abuse according to the means test assessment process described above but they also have the authority to declare abuse when they evaluate a debtor’s complete financial situation. Instances where debtors use strategic timing of their filings to eliminate debts instead of demonstrating actual financial emergencies will result in case dismissal.
Debts That Chapter 7 Does Not Discharge
People who face bankruptcy as a result of their debts’ ineligibility for discharge through Chapter 7 face a distinct form of disqualification. Non-dischargeable debts continue to exist after a person completes the filing process and receives their discharge. The 11 U.S.C. § 523 is the section of the United States Bankruptcy Code that details the debts that are excepted from the normal discharge rules. The items listed below are some examples:
- Spousal maintenance and child support arrears
- In most cases, student loans are not dischargeable in bankruptcy unless the individual meets the strict Brunner standard. The Brunner test is particularly challenging to pass since the individual must prove that he or she cannot maintain a minimal standard of living, that this condition will persist, and that he or she made a genuine effort to repay the loan.
- Most income tax debts with limited exceptions for older taxes that were timely filed and meet additional criteria
- Debts incurred through fraud false pretenses or intentional misrepresentation to a creditor
- Debts from willful and malicious injury to another person or their property
- Fines, penalties, and restitution owed to a government unit
Debtors who owe non-dischargeable debts make Chapter 7 bankruptcy their only option since their debt obligations exceed the threshold for dischargeable debts.
The Median Income Figures Change Twice a Year
Most bankruptcy guides fail to say that means-tested income thresholds do not remain constant. The U.S. Trustee Program updates them in April and November each year.
The updated figures allow a debtor to qualify if their previous threshold exceeded their actual income. Filing with outdated numbers can lead to dismissal or forced conversion to Chapter 13.
The means test creates a time requirement for debtors. For example, an individual who recently lost their job will qualify based on their previous earnings.
The income drop requires six months to reach full effect before someone can establish eligibility. The U.S. Trustee Program’s means-testing page provides current median income tables for every state, which receive updates whenever new datasets become available.
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