You’re drowning in debt and considering Chapter 7 bankruptcy. The first question isn’t whether you should file – it’s whether you can file at all. The Chapter 7 means test stands between you and debt elimination, and failing it could force you into a 5-year Chapter 13 repayment plan instead.
Here’s the reality: most Chapter 7 means test calculators give you a quick pass/fail answer, but they don’t explain what happens if you fail or show you alternatives that might work better. We’ll walk you through the 2025 income limits, show you exactly how the test works, and reveal why debt settlement sometimes delivers better results than bankruptcy – even when you qualify.
What Changed in the 2025 Chapter 7 Income Limits
The Chapter 7 means test, mandated by the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), is updated twice yearly by the U.S. Trustee Program using Census Bureau data, adjusted for the Consumer Price Index.
The May 2025 figures show median income thresholds for Chapter 7 eligibility, effective for cases filed on or after May 15, 2025. These numbers may change again in November 2025, so always check the latest figures before filing.
2025 Median Income Limits by Household Size (according to the Census Bureau)
Below are the annual median income limits for select states, sourced from the U.S. Trustee Program. For households larger than four, add $11,100 per additional member.
1 Person Household:
- Alabama: $60,786
- California: $76,190
- Florida: $65,801
- New York: $68,795
- Texas: $63,448
- National Average: Not applicable (medians are state-specific)
2 Person Household:
- Alabama: $72,639
- California: $99,936
- Florida: $81,109
- New York: $89,052
- Texas: $83,037
3 Person Household:
- Alabama: $83,278
- California: $112,536
- Florida: $93,983
- New York: $108,589
- Texas: $95,391
4 Person Household:
- Alabama: $101,771
- California: $130,845
- Florida: $107,712
- New York: $134,443
- Texas: $110,719
Important: Eligibility depends on your state’s median—not a national average. If your gross household income (averaged over the last six months) falls below your state’s median for your household size, you pass the means test and can likely file Chapter 7. If it’s above, you move to the second part of the test.
Step-by-Step Guide to Form 122A-1 (The Real Means Test)
Amounts below are illustrative only. Actual allowed expenses must be taken from the USTP means-testing tables for your county, household size, and number of vehicles. Bankruptcy uses the USTP versions of IRS National/Local Standards (not the IRS collection tables directly).
The Chapter 7 means test uses Official Bankruptcy Form 122A-1 to calculate your Current Monthly Income (CMI) and compare it to your state’s median. If your income exceeds the median, Form 122A-2 assesses disposable income after allowable expenses. Here’s how it works:
Part 1: Calculate Your Average Monthly Income
CMI is your average gross income (before taxes) from all sources over the six months before filing, excluding Social Security benefits (e.g., SSI, SSDI) and certain VA disability payments, as outlined in 11 U.S.C. § 101(10A)
Example: Tom from Texas (family of 3) earned:
- January: $7,200 | February: $6,800 | March: $7,400
- April: $7,100 | May: $6,900 | June: $7,300
- 6-month total: $42,700 ÷ 6 = $7,117 monthly average
- Annual projection: $7,117 × 12 = $85,400
Texas median for a 3-person household: $95,391. Tom’s income is below the median, so he passes the means test and is eligible for Chapter 7 without needing Form 122A-2.
Part 2: The Expense Deduction Calculation
If your CMI exceeds the state median, you complete Form 122A-2 to calculate disposable income by subtracting allowable expenses, which include IRS National and Local Standards and actual expenses like mortgage or car payments:
IRS Standard Deductions (2025):
- Food, clothing, household supplies: $1,889/month (family of 3)
- Housing and utilities: Varies by county (Tom’s area: $1,650/month)
- Transportation: $1,234/month (includes car payment, insurance, gas)
- Healthcare: $594/month
Additional Allowed Deductions:
- Actual mortgage/rent if higher than standard
- Actual car payments
- Mandatory retirement contributions
- Child care costs
- Court-ordered payments (alimony, child support)
Tom’s Calculation:
Suppose Tom’s annualized CMI was $100,000 ($8,333/month), above the Texas median of $95,391. His calculation might look like:
- Monthly income: $8,333
- IRS standard deductions: $1,889 (food, etc.) + $1,650 (housing) + $1,234 (transportation) + $594 (healthcare) = $5,367
- Actual mortgage: $1,820 (replaces $1,650 housing standard)
- Car payment: $485
- Total allowed expenses: $5,957 ($1,889 + $1,820 + $1,234 + $594 + $485)
- Disposable income: $8,333 – $5,957 = $2,376
Under 11 U.S.C. §707(b)(2)(A)(i), a presumption of abuse arises if your 60-month disposable income is ≥ $17,150 (≈ $285.83/month), or if it’s between $10,275 and $17,150 and sufficient to pay ≥ 25% of your nonpriority unsecured debt.
If this presumption of abuse applies, you may fail the means test, indicating you can afford a Chapter 13 repayment plan. This threshold varies by case; consult an expert for precision.
What If You Fail the Means Test?
Failing the Chapter 7 means test doesn’t mean you’re out of options, but your alternatives have significant drawbacks:
Chapter 13 Bankruptcy
You’ll enter a 3-5 year court-supervised repayment plan. For Tom’s situation:
- Monthly plan payment: ~$1,500-$2,000 (estimated based on disposable income and debt)
- Total paid over 5 years: $90,000-$120,000
- Requires court-supervised budgeting
- Missed payments risk case dismissal
Chapter 13 can protect assets and cure arrears, but it requires 3–5 years of court-supervised payments and strict adherence.
Wait and Retest
If your income drops significantly, you can wait 6 months and retest. However, debt continues growing with interest and fees during this period.
Debt Settlement Alternative
At CuraDebt, we often see debt settlement outperform Chapter 13 for those who fail the means test. This approach involves negotiating with creditors to reduce debt balances and can resolve debt as quickly as your situation allows, without court involvement.
Hypothetical Example:
- Tom’s Chapter 13: $90,000-$120,000 paid over several years
- Tom’s debt settlement: A $100,000 debt could be settled for $70,000, including all fees—a 30% savings. Paying minimums on $100,000 at 25% interest might cost $200,000 over time. Actual savings vary based on your financial situation, account history, and creditor negotiations.
Our experienced team leverages long-standing relationships with creditors, including specific departments at companies like Capital One, to negotiate optimal reductions. Debt settlement resembles negotiating for a valuable item—waiting for the right offer can save thousands. Your results depend on your specific hardship, account history, and ability to save.
Settlement also avoids bankruptcy’s public record. We recommend comparing costs and timelines with a professional.
Long-Term Implications of Bankruptcy
Filing Chapter 7 bankruptcy creates a permanent public record under 11 U.S.C. § 107. Future employers, lenders, or business partners may inquire about your bankruptcy history, potentially affecting applications for jobs, loans, or other financial opportunities.
Common Means Test Myths That Cost People Money
Myth 1: “Spouse Income Always Counts”
Truth: Only if you file jointly or your spouse contributes to household expenses. Strategic timing of filing can sometimes help single-earner couples pass the test.
Myth 2: “Gig Work Income Doesn’t Count”
Truth: All income counts, including Uber, DoorDash, freelance work, and cash jobs. Gig income and 1099 earnings must be included in your Current Monthly Income (CMI); omission can lead to serious issues.
Myth 3: “Stimulus Payments Affect the Test”
Truth: One-time tax credits like stimulus checks have generally been treated as excluded from CMI, while recurring benefits (e.g., unemployment) are included, per 11 U.S.C. § 101(10A).
Myth 4: “I Can Quit My Job to Pass the Test”
Truth: Courts examine your employment history. Quitting a job specifically to pass the means test constitutes bankruptcy fraud.
Myth 5: “Chapter 7 Is Always Better Than Settlement”
Truth: Chapter 7 eliminates most unsecured debts quickly but carries long-term consequences. Debt settlement may resolve debt rapidly with no real need to ever create a public footprint.
When Debt Settlement Beats Bankruptcy (Even If You Qualify)
Here’s what most Chapter 7 means test calculators don’t tell you: passing the test doesn’t automatically make bankruptcy your best option.
Consider Maria’s situation. She passes the means test easily but has $35,000 in credit card debt:
- All debt eliminated
- Potential long-term credit damage
- Some employers check bankruptcy records
Debt settlement:
- Negotiate debt to $24,500, including fees (30% savings on $35,000)
- Paying minimums at 25% interest could cost $70,000 over time
- No public records for employers to find
For Maria, debt settlement saves $17,500 compared to paying debts in full, finishes faster than Chapter 13, and has less long-term impact than Chapter 7. We recommend weighing these factors based on your debt amount and financial goals. Or, just consult with us — free.
The Professional Advantage: Why DIY Means Testing Fails
Most people who use Chapter 7 means test calculators make critical errors:
Income calculation mistakes: Missing irregular income, miscalculating 6-month averages, or including non-qualifying income sources.
Expense deduction errors: Using wrong geographic standards, missing allowed deductions, or including non-qualifying expenses.
Timing mistakes: Filing in the wrong month based on income fluctuations or missing strategic opportunities.
Alternative ignorance: Not understanding that debt settlement might deliver better results even if they qualify for Chapter 7.
Professional bankruptcy attorneys ensure accurate means testing, but they rarely discuss non-bankruptcy alternatives. CuraDebt, on the other hand, specializes in comparing all your options and showing you the real costs and timelines for each approach.
Making the Right Choice: Bankruptcy vs. Settlement
The Chapter 7 means test calculator gives you one piece of the puzzle – whether you qualify for bankruptcy. But qualification doesn’t equal optimal strategy.
Here’s your decision framework:
Choose Chapter 7 if:
- You pass the means test easily
- You have significant assets bankruptcy can protect
- You don’t plan major purchases for 3+ years
Opt for Chapter 13 if:
- You fail the Chapter 7 means test
- You’re behind on mortgage payments but want to keep your home
- You have significant non-dischargeable debt (taxes, student loans)
- You prefer court-supervised structure
Go with debt settlement if:
- You fail the Chapter 7 means test
- You want faster resolution than Chapter 13
- You need to preserve employment opportunities that bankruptcy might affect
Taking Action on Your Means Test Results
Whether your Chapter 7 means test calculator shows a pass or fail result, you now understand the bigger picture. Bankruptcy isn’t your only option, and qualification doesn’t automatically make it your best option.
If you passed the test but want to explore alternatives, or if you failed and need better options than Chapter 13, professional debt settlement deserves serious consideration. CuraDebt folks can analyze your specific situation and show you exactly what settlement would accomplish compared to bankruptcy timelines and costs.
The means test revealed whether you qualify for Chapter 7. Now it’s time to determine which debt relief approach actually serves your long-term financial interests best. Sometimes the fastest path to debt freedom isn’t the one the calculator points toward.
FAQs
The means test is designed to give you a clearer picture of your financial standing. It compares your income to your state’s median and considers essential expenses like housing and transportation. Understanding these numbers helps you identify the best next step—whether that’s Chapter 7, Chapter 13, or another personalized debt-relief strategy that fits your goals.
That doesn’t automatically rule out relief options. The second part of the means test factors in your necessary living costs to determine your true disposable income. Even if you earn more than the median, you may still qualify—or you might find that programs like debt settlement or consolidation could help you reach financial freedom faster, without court involvement.
Absolutely. Many people reach out to us before falling behind because they want to plan ahead and avoid financial stress. Our team reviews your situation, explains your options, and can even help you prequalify for certain programs or loans—with full transparency, no upfront fees, and a focus on real results.
