Means Test Calculator for Chapter 7 Bankruptcy
Use this calculator to estimate whether your income and expenses might allow you to qualify for Chapter 7 bankruptcy under the U.S. Bankruptcy Code's means test. This is a simplified tool and should not replace legal advice from a qualified bankruptcy attorney.
Understanding the Bankruptcy Means Test
The Means Test is a crucial component of U.S. bankruptcy law, primarily designed to determine whether an individual or couple qualifies for Chapter 7 bankruptcy. Chapter 7, often referred to as "liquidation bankruptcy," allows debtors to discharge most of their unsecured debts, such as credit card debt and medical bills, by selling non-exempt assets. The Means Test was introduced with the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) to prevent higher-income debtors from filing Chapter 7 when they could reasonably afford to repay some of their debts through a Chapter 13 repayment plan.
How the Means Test Works
The test generally involves two main parts:
- Median Income Test: The first step compares your current monthly income (averaged over the six full calendar months before you file for bankruptcy) to the median income for a household of your size in your state. If your annualized income is below the state's median, you generally pass the means test and are presumed eligible for Chapter 7.
- Disposable Income Test: If your income is above the state median, you proceed to the second part. This involves calculating your "disposable income" by subtracting certain allowed expenses from your current monthly income. These allowed expenses are often based on IRS national and local standards, as well as actual necessary expenses like secured debt payments (mortgage, car loans), priority debt payments (taxes, child support), health insurance premiums, and out-of-pocket healthcare costs.
Interpreting Disposable Income
Once your disposable income is calculated, it's multiplied by 60 (representing 60 months or five years). This 60-month disposable income is then compared to specific thresholds:
- If your 60-month disposable income is below a certain threshold (currently $9,075), you are generally presumed to qualify for Chapter 7.
- If your 60-month disposable income is above a higher threshold (currently $15,175), you are generally presumed to fail the means test, meaning Chapter 13 bankruptcy might be your only option.
- If your 60-month disposable income falls between these two thresholds, the test becomes more complex. It then depends on whether your disposable income is sufficient to pay a certain percentage (typically 25%) of your non-priority unsecured debts over five years. In this scenario, a bankruptcy attorney's detailed analysis is essential.
Important Considerations
- Not a Guarantee: Passing the means test does not guarantee Chapter 7 eligibility. Other factors, such as previous bankruptcy filings or fraudulent activity, can still lead to a denial.
- Exemptions: Some debtors are exempt from the means test, such as disabled veterans whose debts were incurred primarily while on active duty or performing homeland defense activities, or individuals whose debts are primarily non-consumer debts (e.g., business debts).
- State-Specific Data: The state median income figures and IRS expense standards are updated periodically and vary significantly by location and household size. It's crucial to use the most current and accurate data for your specific situation.
- Legal Advice is Crucial: This calculator provides a simplified estimate. The actual means test calculation can be intricate, with many nuances and exceptions. Consulting with an experienced bankruptcy attorney is highly recommended to ensure accurate assessment and proper filing.
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function calculateMeansTest() {
var currentMonthlyIncome = parseFloat(document.getElementById('currentMonthlyIncome').value);
var householdSize = parseInt(document.getElementById('householdSize').value);
var stateMedianIncome = parseFloat(document.getElementById('stateMedianIncome').value);
var allowedLivingExpenses = parseFloat(document.getElementById('allowedLivingExpenses').value);
var securedDebtPayments = parseFloat(document.getElementById('securedDebtPayments').value);
var priorityDebtPayments = parseFloat(document.getElementById('priorityDebtPayments').value);
var healthInsurancePremiums = parseFloat(document.getElementById('healthInsurancePremiums').value);
var healthcareCosts = parseFloat(document.getElementById('healthcareCosts').value);
var educationCosts = parseFloat(document.getElementById('educationCosts').value);
var childcareCosts = parseFloat(document.getElementById('childcareCosts').value);
var charitableContributions = parseFloat(document.getElementById('charitableContributions').value);
var resultDiv = document.getElementById('result');
resultDiv.innerHTML = "; // Clear previous results
// Validate inputs
if (isNaN(currentMonthlyIncome) || isNaN(householdSize) || isNaN(stateMedianIncome) ||
isNaN(allowedLivingExpenses) || isNaN(securedDebtPayments) || isNaN(priorityDebtPayments) ||
isNaN(healthInsurancePremiums) || isNaN(healthcareCosts) || isNaN(educationCosts) ||
isNaN(childcareCosts) || isNaN(charitableContributions) ||
currentMonthlyIncome < 0 || householdSize <= 0 || stateMedianIncome < 0 ||
allowedLivingExpenses < 0 || securedDebtPayments < 0 || priorityDebtPayments < 0 ||
healthInsurancePremiums < 0 || healthcareCosts < 0 || educationCosts < 0 ||
childcareCosts < 0 || charitableContributions < 0) {
resultDiv.innerHTML = '
Please enter valid positive numbers for all fields.';
return;
}
// Step 1: Median Income Test
var annualizedIncome = currentMonthlyIncome * 12;
if (annualizedIncome < stateMedianIncome) {
resultDiv.innerHTML = 'Based on your income, you are likely to
PASS the Means Test (Below Median Income).';
return;
}
// Step 2: Disposable Income Test (if above median)
var totalAllowedExpenses = allowedLivingExpenses + securedDebtPayments + priorityDebtPayments +
healthInsurancePremiums + healthcareCosts + educationCosts +
childcareCosts + charitableContributions;
var disposableIncome = currentMonthlyIncome – totalAllowedExpenses;
var sixtyMonthDisposableIncome = disposableIncome * 60;
// Means Test Thresholds (these are subject to change, consult official sources)
var lowerThreshold = 9075; // As of May 2024, for cases filed on or after April 1, 2022
var upperThreshold = 15175; // As of May 2024, for cases filed on or after April 1, 2022
if (sixtyMonthDisposableIncome < lowerThreshold) {
resultDiv.innerHTML = 'Based on your disposable income, you are likely to
PASS the Means Test (Below Disposable Income Threshold).';
} else if (sixtyMonthDisposableIncome > upperThreshold) {
resultDiv.innerHTML = 'Based on your disposable income, you are likely to
FAIL the Means Test (Above Disposable Income Threshold). Chapter 13 may be an option.';
} else {
resultDiv.innerHTML = 'Your disposable income falls in a
GRAY AREA. Further review is needed to determine if you qualify for Chapter 7. This often involves comparing your disposable income to 25% of your non-priority unsecured debt.';
}
}