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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. Chapter 7 might the quickest, easiest, and the least costly chapter of bankruptcy to file. However, debtors (people who file for bankruptcy relief) must meet the Chapter 7 income qualifications 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. 

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 (the 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 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. 

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 are 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. Annual median income is based on your CMI. To calculate CMI, all income received during the six months before filing Chapter 7 and divide 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).

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.

In a Chapter 7 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. 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.

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.

If you are interested in filing Chapter 7, check your income limit for Chapter 7 in the table below by your state. List is in state alphabetical order. All of these figures are for bankruptcy filings on or after November 1, 2020 based on means testing data. Please note that you would add $9,000 for each household size greater than 9 persons.

Alaska Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$63,223
2$85,572
3$101,965
4$101,965
5$110,965
6$119,965
7$128,965
8$137,965
9$146,965

Alabama Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$49,191
2$59,818
3$66,280
4$80,845
5$89,845
6$98,845
7$107,845
8$116,845
9$125,845

Arkansas Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$46,120
2$57,753
3$66,203
4$67,349
5$76,349
6$85,349
7$94,349
8$103,349
9$112,349

Arizona Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$55,159
2$69,122
3$74,639
4$84,669
5$93,669
6$102,669
7$111,669
8$120,669
9$129,669

California Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$62,171
2$82,418
3$91,605
4$105,232
5$114,232
6$123,232
7$132,232
8$141,232
9$150,232

Colorado Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$66,942
2$87,103
3$95,050
4$114,066
5$123,066
6$132,066
7$141,066
8$150,066
9$159,066

Connecticut Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$68,400
2$89,186
3$102,282
4$129,379
5$138,379
6$147,379
7$156,379
8$165,379
9$174,379

District of Columbia Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$70,070
2$130,524
3$130,524
4$171,779
5$180,779
6$189,779
7$198,779
8$207,779
9$216,779

Delaware Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$61,395
2$77,853
3$91,369
4$107,204
5$116,204
6$125,204
7$134,204
8$143,204
9$152,204

Florida Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$52,534
2$65,935
3$70,815
4$84,165
5$93,165
6$102,165
7$111,165
8$120,165
9$129,165

Georgia Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$52,458
2$67,463
3$75,460
4$91,161
5$100,161
6$109,161
7$118,161
8$127,161
9$136,161

Hawaii Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$71,514
2$83,198
3$94,851
4$118,223
5$127,223
6$136,223
7$145,223
8$154,223
9$163,223

Iowa Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$51,095
2$70,892
3$80,912
4$95,199
5$104,199
6$113,199
7$122,199
8$131,199
9$140,199

Idaho Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$51,837
2$64,929
3$72,304
4$89,661
5$98,661
6$107,661
7$116,661
8$125,661
9$134,661

Illinois Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$57,983
2$76,602
3$91,581
4$107,226
5$116,226
6$125,226
7$134,226
8$143,226
9$152,226

Indiana Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$51,689
2$65,577
3$77,161
4$90,654
5$99,654
6$108,654
7$117,654
8$126,654
9$135,654

Kansas Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$51,957
2$71,559
3$83,375
4$92,890
5$101,890
6$110,890
7$119,890
8$128,890
9$137,890

Kentucky Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$49,041
2$58,298
3$67,461
4$81,619
5$90,619
6$99,619
7$108,619
8$117,619
9$126,619

Louisiana Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$46,909
2$57,592
3$67,337
4$82,529
5$91,529
6$100,529
7$109,529
8$118,529
9$127,529

Massachusetts Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$70,834
2$90,912
3$110,779
4$140,309
5$149,309
6$158,309
7$167,309
8$176,309
9$185,309

Maryland Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$70,964
2$93,255
3$107,552
4$130,252
5$139,252
6$148,252
7$157,252
8$166,252
9$175,252

Maine Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$54,679
2$68,863
3$82,132
4$91,651
5$100,651
6$109,651
7$118,651
8$127,651
9$136,651

Michigan Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$53,159
2$66,198
3$79,484
4$97,970
5$106,970
6$115,970
7$124,970
8$133,970
9$142,970

Minnesota Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$61,811
2$81,478
3$100,430
4$118,646
5$127,646
6$136,646
7$145,646
8$154,646
9$163,646

Missouri Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$50,521
2$65,680
3$75,500
4$89,418
5$98,418
6$107,418
7$116,418
8$125,418
9$134,418

Mississippi Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$44,765
2$53,919
3$57,747
4$70,656
5$79,656
6$88,656
7$97,656
8$106,656
9$115,656

Montana Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$54,201
2$67,777
3$75,151
4$81,958
5$90,958
6$99,958
7$108,958
8$117,958
9$126,958

North Carolina Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$50,653
2$66,044
3$72,069
4$88,942
5$97,942
6$106,942
7$115,942
8$124,942
9$133,942

North Dakota Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$55,022
2$77,965
3$89,584
4$103,996
5$112,996
6$121,996
7$130,996
8$139,996
9$148,996

Nebraska Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$50,847
2$71,440
3$85,929
4$96,749
5$105,749
6$114,749
7$123,749
8$132,749
9$141,749

New Hampshire Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$71,169
2$82,328
3$106,627
4$128,157
5$137,157
6$146,157
7$155,157
8$164,157
9$173,157

New Jersey Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$71,064
2$87,432
3$111,046
4$132,708
5$141,708
6$150,708
7$159,708
8$168,708
9$177,708

New Mexico Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$46,945
2$57,296
3$62,443
4$66,343
5$75,343
6$84,343
7$93,343
8$102,343
9$111,343

Nevada Chapter 7 Bankruptcy Income Limits

New York Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$59,956
2$76,219
3$91,381
4$111,054
5$120,054
6$129,054
7$138,054
8$147,054
9$156,054

Ohio Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$51,776
2$66,242
3$78,059
4$95,003
5$104,003
6$113,003
7$122,003
8$131,003
9$140,003

Oklahoma Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$48,528
2$63,012
3$67,362
4$78,458
5$87,458
6$96,458
7$105,458
8$114,458
9$123,458

Oregon Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$61,303
2$73,378
3$88,474
4$100,533
5$109,533
6$118,533
7$127,533
8$136,533
9$145,533

Pennsylvania Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$57,213
2$70,577
3$87,217
4$103,857
5$112,857
6$121,857
7$130,857
8$139,857
9$148,857

Rhode Island Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$63,724
2$79,791
3$95,390
4$108,105
5$117,105
6$126,105
7$135,105
8$144,105
9$153,105

South Carolina Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$49,390
2$64,083
3$70,883
4$85,227
5$94,227
6$103,227
7$112,227
8$121,227
9$130,227

South Dakota Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$51,723
2$70,592
3$82,532
4$90,951
5$99,951
6$108,951
7$117,951
8$126,951
9$135,951

Tennessee Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$50,182
2$63,203
3$71,133
4$85,923
5$94,923
6$103,923
7$112,923
8$121,923
9$130,923

Texas Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$52,308
2$70,418
3$76,170
4$88,109
5$97,109
6$106,109
7$115,109
8$124,109
9$133,109

Utah Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$66,445
2$72,855
3$85,507
4$95,430
5$104,430
6$113,430
7$122,430
8$131,430
9$140,430

Virginia Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$64,079
2$81,900
3$97,056
4$114,910
5$123,910
6$132,910
7$141,910
8$150,910
9$159,910

Vermont Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$55,409
2$73,601
3$87,394
4$111,095
5$120,095
6$129,095
7$138,095
8$147,095
9$156,095

Washington Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$70,194
2$85,189
3$98,730
4$112,182
5$121,182
6$130,182
7$139,182
8$148,182
9$157,182

Wisconsin Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$54,660
2$72,171
3$87,353
4$103,708
5$112,708
6$121,708
7$130,708
8$139,708
9$148,708

West Virginia Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$50,235
2$54,841
3$67,702
4$73,600
5$82,600
6$91,600
7$100,600
8$109,600
9$118,600

Wyoming Chapter 7 Bankruptcy Income Limits

# of PeopleAnnual Income
1$57,091
2$71,840
3$83,878
4$100,012
5$109,012
6$118,012
7$127,012
8$136,012
9$145,012

Post Author: Ben Tejes

Ben Tejes is a co-founder and CEO of Ascend Finance. Before Ascend, Ben held various executive roles at personal finance companies. Ben specializes in Chapter 13 Bankruptcy, Debt Settlement, Chapter 7 Bankruptcy and debt payoff methods. In his free time, Ben enjoys spending time going on adventures with his wife and three young daughters.

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