Filing for Chapter 7 bankruptcy can provide significant relief for individuals and families facing overwhelming debt. However, not everyone qualifies. To determine eligibility, the U.S. Bankruptcy Code requires most applicants to complete the Means Test. This test is designed to ensure that Chapter 7 is reserved for those who truly cannot afford to repay their debts.
In this post, we’ll break down how the Means Test works, what information it requires, and how it applies specifically to residents of New York, including Central New York and the Southern Tier.
What Is the Means Test?
The Means Test is a financial calculation that evaluates your income, expenses, and household size to determine whether you qualify for Chapter 7.
There are two main steps in the test:
- Compare Your Income to the Median
- Calculate Your Disposable Income
Let’s walk through each part.
Step 1: Comparing Your Income to the State Median
The first part of the test looks at your average monthly income from all sources over the past six months (excluding Social Security benefits). This includes wages, rental income, business income, and contributions from others.
Then, your income is compared to the median income for a household of your size in New York. If your income is below the median, you automatically qualify for Chapter 7, and the Means Test ends there.
As of 2025, here are some example median income levels for New York (these figures are updated regularly by the Department of Justice):
- 1-person household: Approximately $66,000
- 2-person household: Approximately $84,000
- 3-person household: Approximately $100,000
- 4-person household: Approximately $117,000
If your income is above the median, you’ll move to Step 2.
Step 2: Calculating Your Disposable Income
In this step, you deduct certain allowed expenses from your income to calculate your monthly disposable income. These expenses can include:
- Housing and utilities
- Transportation
- Food and clothing
- Medical expenses
- Court-ordered payments (like child support)
- Actual expenses for taxes and secured debts
The IRS provides national and local standards for many of these deductions, while others must be documented and justified.
If your disposable income after allowable deductions is low enough, you may still qualify for Chapter 7. If it’s too high, you might need to consider Chapter 13 bankruptcy, which involves a structured repayment plan over 3 to 5 years.
Special Considerations for Families, Farmers, and Business Owners
Certain groups may face unique circumstances under the Means Test:
- Families: The number of dependents in your household can significantly impact your income threshold and expense deductions.
- Farmers and Fishers: Chapter 12 bankruptcy, not Chapter 7, may be more appropriate and has its eligibility standards.
- Small Business Owners: Business expenses and irregular income can complicate the Means Test calculation. A careful review with a bankruptcy attorney is essential.
What If You Don’t Pass the Means Test?
Failing the Means Test doesn’t mean you’re out of options. You may:
- Qualify for Chapter 13, which allows you to keep property while repaying debts over time.
- Explore bankruptcy alternatives such as debt settlement, loan modifications, or negotiation with creditors.
A knowledgeable bankruptcy attorney can help you assess your situation and choose the right path forward.
Why Legal Guidance Matters
While online calculators and tools can provide a rough estimate, the Means Test is complex and highly detailed. Mistakes in your calculations or documentation can lead to delays or even case dismissal.
At Orville & McDonald Law, we walk clients through the Means Test step by step. We take the time to understand your full financial picture and help you determine the most appropriate form of debt relief for your needs.
Contact Orville & McDonald Law
If you’re struggling with debt and wondering whether Chapter 7 bankruptcy is an option for you, don’t guess—get trusted legal advice. Our experienced team serves individuals, families, farmers, and business owners throughout Central New York and the Southern Tier.
Contact us today for a confidential consultation:
- Phone (Binghamton): (607) 770-1007
- Phone (Syracuse and Utica): (315) 273-2034
- Address: 30 Riverside Dr., Binghamton, NY 13905
- Website: https://orvilleandmcdonaldlaw.com
Disclaimer: This blog post provides general information for educational purposes only. It is not legal advice. For advice on your specific circumstances, please contact a qualified attorney.
