Bankruptcy / Income Limit For Chapter 7 Bankruptcy

What Is The Income Limit For Filing Chapter 7 Bankruptcy in 2022?

Written by Ben Tejes
Updated Apr 5th, 2022
If you want to file for bankruptcy relief, one of the first things that you must determine is whether you meet the income limit for Chapter 7 bankruptcy. Chapter 7 bankruptcy is often the quickest, easiest, and most affordable bankruptcy to file. 

However, debtors (people who file for bankruptcy relief) must meet the Chapter 7 income qualifications under means testing to receive a bankruptcy discharge. The bankruptcy discharge is why you file a bankruptcy case. A discharge releases you from the legal responsibility to repay a day. Without a discharge, you owe your debts as if you never filed for bankruptcy relief. 

Chapter 7 Income Limit Bankruptcy Calculator

Income is complicated. There are hundreds of variables including such things as changing jobs, variable income, losing income, etc. We will explain just how to calculator your income for the 6 month look back, but to make it easier, we build a free Chapter 7 income limit bankruptcy calculator to allow you to estimate your qualification. The calculator uses the most recent median income figures and are updated as soon as the numbers are updated.

Bankruptcy Means Testing Median Income Numbers

The bankruptcy means testing numbers are updated every 6 months or so. The latest figures in the table below are for cases filed on or after April 1, 2022 (source):

State1 Earner2 People3 People4 People*
Alabama$52,404$62,918$71,682$87,645
Alaska$70,545$83,268$104,659$112,092
Arizona$59,417$74,303$83,510$96,426
Arkansas$47,373$59,105$68,957$79,664
California$69,660$86,271$97,021$113,615
Colorado$70,100$91,076$105,388$124,206
Connecticut$75,840$93,182$112,921$132,030
Delaware$65,997$77,011$95,922$113,801
District of Columbia$79,970$135,589$135,589$189,519
Florida$55,951$68,638$77,217$93,031
Georgia$56,008$71,464$81,241$95,959
Hawaii$72,950$85,718$96,946$116,313
Idaho$58,089$71,960$81,442$90,009
Illinois$62,130$78,602$94,397$113,228
Indiana$56,225$70,159$83,146$95,002
Iowa$56,453$75,323$88,645$106,775
Kansas$56,626$73,843$81,730$104,767
Kentucky$51,824$61,945$70,091$87,902
Louisiana$49,099$59,963$67,955$84,596
Maine$56,887$73,159$88,452$110,295
Maryland$74,074$95,445$113,317$140,379
Massachusetts$74,505$93,086$117,749$150,387
Michigan$58,684$69,789$86,917$103,336
Minnesota$66,334$84,207$105,800$130,852
Mississippi$45,002$56,462$65,693$80,158
Missouri$56,633$69,699$82,882$101,203
Montana$60,032$72,102$77,793$101,329
Nebraska$60,390$77,581$92,447$106,728
Nevada$58,770$70,353$80,200$88,840
New Hampshire$77,662$90,968$126,743$140,317
New Jersey$77,681$91,716$113,460$143,987
New Mexico$50,177$64,080$66,001$76,026
New York$63,715$78,663$95,779$116,818
North Carolina$55,621$69,303$80,895$99,190
North Dakota$64,929$83,377$86,331$115,080
Ohio$57,364$70,490$84,176$101,907
Oklahoma$51,256$64,056$71,448$83,371
Oregon$64,492$78,163$94,432$109,713
Pennsylvania$61,530$74,369$93,412$113,037
Puerto Rico$27,013$27,013$30,376$37,997
Rhode Island$65,608$83,513$101,399$120,481
South Carolina$55,101$67,050$76,030$93,154
South Dakota$53,011$75,960$85,918$96,645
Tennessee$53,004$66,506$78,715$88,698
Texas$55,591$71,860$80,765$94,213
Utah$67,380$75,831$95,313$102,835
Vermont$64,754$79,992$96,074$117,173
Virginia$69,791$86,413$102,791$124,304
Washington$76,962$89,711$107,724$128,225
West Virginia$52,239$58,308$75,891$83,570
Wisconsin$58,467$75,789$91,906$109,665
Wyoming$60,607$76,416$86,712$96,745
* Add $9,000 for each individual in excess of 4.

Understanding the Income Limit for Chapter 7 Bankruptcy Cases

Congress added an income limit for Chapter 7 when it revised bankruptcy laws in 2005. BAPCPA (Bankruptcy Abuse Prevention and Consumer Protection Act) changed the way debtors qualified for a bankruptcy discharge in Chapter 7. The purpose of the chance was to prevent bankruptcy abuse by limiting Chapter 7 cases to individuals who could not afford to repay any portion of their unsecured debts.

Why Income Limits Are Important in Chapter 7 Cases

The income limits in Chapter 7 can prevent you from receiving a bankruptcy discharge if you file Chapter 7. The income limit for Chapter 7 does not prevent you from filing a Chapter 7 bankruptcy case. You can file for Chapter 7 regardless of how much money you earn.

However, if your income exceeds the Chapter 7 income limits, you may not be eligible to receive a bankruptcy discharge. In other words, your bankruptcy filing does not result in debt relief. The court can deny your bankruptcy discharge based on abuse. 

When your income exceeds the maximum income for Chapter 7 bankruptcy cases, you need to file under Chapter 13 to receive a bankruptcy discharge. The assumption is that if your income is higher than the maximum income for Chapter 7, you can afford to pay a percentage of what you owe to your unsecured creditors. 

Unsecured creditors do not have liens on your property. Examples of unsecured debts included credit cards, personal loans, and medical bills.

How to Calculate Income for the Chapter 7 Means Test

The first step is to gather proof of income for the past six months. Income for the Chapter 7 means test is based on income for the six months before you file your Chapter 7 cases. Therefore, if you file your Chapter 7 bankruptcy petition on July 15, you need to report all income from January 1 through June 30.  You can find the exact language to calculator income in this form of the bankruptcy means testing forms

Image showing text how Income Limit is Calculated for Means Test

Which Income is Included for the Chapter 7 Bankruptcy means test?

Income includes income earned and income received from all other sources, except income from the Social Security Act. Income received from Social Security retirement income, SSDI, and SSI is not included in income for the Chapter 7 Means Test.

Examples of income used for the Chapter 7 Means Test include:

  • Wages and salaries, including overtime, bonuses, and commissions
  • Net income from self-employment or operation of a business
  • Net income from rental property
  • Unemployment income
  • Workers’ compensation income
  • Interest, royalties, and dividends
  • Annuities, retirement income, and pensions
  • Private disability insurance income
  • Child support and spousal support
  • Regular income contributed by another person for household expenses, such as a non-filing spouse’s income and money from a roommate, domestic partner, parent, or friend

Completing the Means Test

Section One – Median Income

There are two terms you need to understand when completing the first part of the Chapter 7 Means Test — current monthly income (CMI) and annual median income. The annual median income is based on your CMI. To calculate CMI, all income received during the six months before filing Chapter 7 and divided by six. Therefore, if your income for six months is $25,000, your current monthly income equals $4,166.67 ($25,000 divided by 6).

The annual median income is calculated by multiplying CMI by 12. In the example above, median income is $50,000.04 ($4,166.67 x 12). Your annual median income is compared to the annual median income for your state (see our chart below). If your median income is lower than the median income for your state, you are presumptively eligible for a bankruptcy discharge under Chapter 7. In other words, you can receive debt forgiveness in Chapter 7 if you meet the other requirements for filing Chapter 7.  Please see the annual income calculator below to estimate your average income.

Once you understand your median income, you may want to take a Chapter 7 means test calculator to estimate whether you qualify for a Chapter 7 bankruptcy. You can use the calculator below to estimate your qualification.


Section Two – Statement of Exemption from Presumption of Abuse

There are certain provisions that may exempt you from the means test altogether. These are related to whether the debts are consumer-related and whether you are a disabled veteran or whether you are or have been a member of the National Guard or a Reservist. See the bankruptcy form, "Statement of Exemption from Presumption of Abuse Under §707(b)(2)" for more information.

Section Three – Disposable Income

If you earn too much income to qualify for Chapter 7 under the median income test, you could qualify for Chapter 7 under the disposable income test. Disposable income is the amount of money you have each month after deducting your ordinary living expenses and mandatory payroll deductions. In Chapter 13 cases, you must include disposable income in your Chapter 13 plan. See the able median calculator below to see whether you may still qualify for a Chapter 7 bankruptcy even if your income exceeds the median income based on your household size and state.

CALCULATOR

In a Chapter 7 bankruptcy case, if your disposable income is below a certain level, you can still qualify for a bankruptcy discharge even though your annual median income is higher than the income limit for Chapter 7 bankruptcy. Examples of expenses that may be deducted from CMI to calculate disposable income include:
  • Required payroll deductions, such as payroll taxes, uniforms, union dues, and mandatory retirement savings
  • Food, clothing, and household expenses
  • Car payments, rent, lease payments, and mortgage payments
  • Out of pocket health care costs
  • Health insurance, term life insurance, and disability insurance premiums
  • Childcare costs and school expenses for minor children
  • Vehicle operating costs or public transportation costs
  • Court-ordered child support or alimony payments

The expenses are based on how many people live in your home. Also, some monthly expenses are limited and based on national standards for living expenses. Some of your monthly expenses may not be used, such as expensive memberships to gyms or golf clubs. Also, if your expenses exceed “normal” amounts, you may need to justify and provide proof of the expense. For example, your health care costs are very high because your child has a disability.

Conclusion

The income limit for Chapter 7 is based on the state where you live, the househould size, and your income level. Hopefully this article helped you understand just how to calculator your annualized income for the bankruptcy forms.

You can find the Chapter 7 Bankruptcy Means Test Calculator here to see if you qualify for Chapter 7. For additional information about Chapter 7 cases or to find a Chapter 7 attorney near you, contact Ascend. You can call or text us at 833-272-3631 if you have questions or need help.