If you’ve been reading about Chapter 7 bankruptcy, you’ve probably run into the “means test” — usually described just vaguely enough to make you nervous. It’s the test that decides whether you qualify for Chapter 7 at all. Here’s what it actually is, how it works in Pennsylvania, and why a lot of people who assume they’ll fail it actually pass.
What the means test is
The means test is a formula Congress added to the bankruptcy law in 2005. Its stated purpose is simple: if your income is high enough that you could repay a meaningful portion of your debts, you should be in a Chapter 13 repayment plan instead of wiping the debts out in Chapter 7.
In practice, it’s a math exercise with two stages — and most people who file Chapter 7 pass at the first one.
Stage one: is your income below the Pennsylvania median?
First, we calculate your “current monthly income.” Despite the name, it’s not what you make this month — it’s your average gross income over the last six full months before filing, from almost all sources: wages, overtime, bonuses, unemployment, pension income, money regularly contributed by others toward your household expenses.
That number is compared to the median income for a household your size in Pennsylvania, using figures published by the U.S. Trustee that are updated regularly. If your income is below the median, you pass. Full stop. No expense analysis, no further test — you can file Chapter 7.
Stage two: the expense calculation
If your income is above the median, you don’t automatically fail. You move to the second stage, where you subtract allowed expenses from your income. Some of those expenses are set by IRS standards (housing, utilities, food, transportation), and some are your actual obligations:
- Mortgage or rent and car payments
- Income taxes and payroll deductions
- Court-ordered support payments
- Health insurance and significant medical costs
- Childcare needed so you can work
After those deductions, if what’s left over is below the legal thresholds, there’s no “presumption of abuse” and you can file Chapter 7. If too much is left over, Chapter 7 is usually off the table — but Chapter 13 still is not, and plenty of above-median families end up paying back only a fraction of their unsecured debt through a plan.
Three things most articles don’t tell you
The six-month window cuts both ways. Because income is measured over the six months before filing, timing can change the answer. A recent layoff, lost overtime, or reduced hours may mean waiting a short time puts you under the median — or the reverse if your income just went up. This is real, legitimate strategy, and it’s a reason to run the numbers before you file, not after.
Some people skip the test entirely. If more than half of your debt is not consumer debt — business debt, for example, or tax debt — the means test doesn’t apply to you at all. There are also exemptions for certain disabled veterans and for service members called to active duty.
“Income” is broader than a paycheck, but not everything counts. Social Security benefits are excluded from the means test calculation. Most other money coming into the household regularly is not. People get surprised in both directions here, which is again why the numbers need to be run properly.
Frequently asked questions
I just got a raise / lost my job. Which income counts?
The look-back is mechanical — the six full months before the filing date, whatever they contained. A change right before filing can matter a great deal, for better or worse, which is why timing is part of the consultation.
If I fail the means test, am I out of options?
No. Chapter 13 has no means-test gate to enter (the test instead helps set what your plan pays), and for above-median earners it’s often still a very good outcome: garnishments stop, arrears get caught up, and unsecured creditors frequently receive very little.
Can I just guess at my numbers?
You can, but don’t. The means test is unforgiving about documentation — pay stubs, tax returns, and proof of expenses — and an error can get a case flagged or dismissed. An experienced bankruptcy attorney runs this calculation every day.
Let’s run your numbers — free
The means test is math, not a mystery. Bring your last six months of pay stubs to a free consultation at the Law Offices of Jason P. Provinzano, LLC, 16 W. Northampton Street in Wilkes-Barre, or call 570-822-5771, and we’ll tell you exactly where you stand.
This article is general information about bankruptcy law, not legal advice about your specific situation.
