The Bankruptcy Means Test

The United States Bankruptcy Code requires those planning to file bankruptcy to pass a means test.  The means test is designed to prevent those with high incomes from having all their debts discharged in a Chapter 7 Bankruptcy.  The rules of the means test are as follows:  Those who make above the median income in their state, city or area, must file Chapter 13 bankruptcy and pay back a portion of their debts over a five year period.  Those who earn below the median income in their state, city or area can go ahead and file Chapter 7 bankruptcy and have most if not all of their debts discharged in bankruptcy.

There are more factors besides just median income in play here.  Those who have high incomes, but also have lots of expenses that eat up a big chunk of their income may still qualify for a Chapter 7 bankruptcy.  The formula for the means test takes a person's income and deducts certain expenses to arrive at disposable income.  If a person's disposable income is sufficient to pay off some or all of outstanding debt, that person may be forced to file a Chapter 13 bankruptcy and make monthly payments to the bankruptcy court over a five year period.  If there is little or no disposable income, a person will probably be able to file Chapter 7 bankruptcy, even if she earns more than the median income.

So how do you know if your income after allowable expenses is above or below the median in your state, city or area?  The Department of Justice Trustee Program actually compiles data supplied by the Census Bureau and formulates a median income for each state for one to four people, and adds an additional amount for each person living in the household beyond four people based on the census data and the consumer price index.  The median income is adjusted each year.  Those filing bankruptcy are required to list the applicable median income provided by the Department of Justice on either Form 22A or 22C as a requirement for filing bankruptcy.

The figures below lists the median incomes earned by American households in recent years. This data was compiled by the United States Census Bureau.  The median incomes below are not the amounts the bankruptcy court will use to determine if you qualify for Chapter 7 or Chapter 13 bankruptcy.  The median incomes below are offered just to give you an idea of what the median income in your state and give you a quick idea of where you stand.  The figures shown are for a two income household.  Visit the Department of Justice website for the actual figures about the median incomes in your state that you will be required to use. The Department of Justice, Trustee Program, oversees the calculation of the median incomes used in the bankruptcy means test to determine if one qualifies for either Chapter 7 or Chapter 13 bankruptcy.
$46,025  Alabama
$70,811  Alaska
$53,781  Arizona
$44,048  Arkansas
$61,539  California
$62,431  Colorado
$70,342  Connecticut
$59,927  Delaware
$78,313  Dist.of Col.
$49,729  Florida
$50,712  Georgia
$62,432  Hawaii
$49,242  Idaho
$57,964  Illinois
$49,669  Indiana
$55,217  Iowa
$55,801  Kansas
$44,696  Kentucky
$46,169  Louisiana
$51,738  Maine
$73,947  Maryland
$64,174  Massachusetts
$50,079  Michigan
$61,170  Minnesota
$41,601  Mississippi
$50,603  Missouri
$49.743  Montana
$55,519  Nebraska
$55,573  Nevada
$61,679  New Hampshire
$67,503  New Jersey
$49,515  New Mexico
$56,113  New York
$48.710  North Carolina
$58.742  North Dakota
$50,253  Ohio
$48,313  Oklahoma
$52,316  Oregon
$53,091  Pennsylvania
$59,624  Rhode Island
$47,853  South Carolina
$55,026  South Dakota
$47,234  Tennessee
$53,950  Texas
$55,555  Utah
$55,110  Vermont
$64,288  Virginia
$61,919  Washington
$44,018  West Virginia
$55,671  Wisconsin
$62,072  Wyoming
Debt  >  Bankruptcy >  Bankruptcy Means Test
Median Incomes by State - 2 Earners

Guam $43,617
Northern Mariana Islands $24,496
Puerto Rico $21,190
Virgin Islands $34,786
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