Chapter 7 Income Limits by State: Do You Qualify in 2025?

You earn $4,500 a month. Your neighbor earns $8,000. You both wonder if you can file Chapter 7 bankruptcy. The answer depends on where you live, how many people are in your household, and what the court considers "income."

The bankruptcy code doesn't set a single nationwide income cap. Instead, each state has its own median income threshold based on household size. If your monthly income falls below that number, you pass the first part of the means test automatically. If you're above the median, the test gets more complex—but you're not out of options.

How the Means Test Works

The means test exists to separate filers who genuinely can't repay debts from those who can afford a Chapter 13 repayment plan. It has two parts.

Part 1: Income comparison. The court takes your average monthly income from the past six months and compares it to your state's median for your household size. If you're below that median, you qualify. No further math required.

Part 2: Expense calculation. If you're above the median, the court subtracts your allowed expenses,rent, utilities, food, medical costs, secured debt payments,from your income. If what's left (your "disposable income") is too low to fund a meaningful Chapter 13 plan, you can still file Chapter 7.

About 85% of Chapter 7 filers pass based on income alone. That means most people never reach the second part.

What Counts as Income for the Means Test

The court uses a broad definition. Your "current monthly income" includes:

• Wages, salary, tips, bonuses, and overtime
• Self-employment income (gross receipts minus ordinary business expenses)
• Rental income
• Pension and retirement distributions
• Unemployment benefits
• Child support and alimony you receive
• Regular contributions from family members or friends

Some income is excluded: Social Security benefits, payments under the Federal Emergency Management Agency, and certain payments to victims of war crimes or terrorism. Tax refunds don't count, and neither do one-time gifts.

If your income fluctuates,seasonal work, freelance gigs, irregular bonuses,the six-month average can help or hurt you. A high-earning summer month drags up your average even if you're broke now. A low winter month brings it down. Timing matters.

2025 Median Income Limits by State

The table below shows monthly median income by household size. These figures update every few months based on Census Bureau data. Use them as a starting point, not gospel,your bankruptcy attorney will calculate your exact number.

For households larger than four people, add roughly $1,000 to $1,500 per additional person. Your local bankruptcy court publishes the exact figures.

What Happens If You're Above the Median

Earning more than the median doesn't disqualify you. You move to the second part of the means test, which subtracts your expenses from your income.

The court uses standardized expense amounts for basics like food and clothing (based on IRS Collection Financial Standards). You get actual expense amounts for:

• Rent or mortgage payments
• Car payments and operating costs
• Court-ordered obligations (child support, alimony)
• Childcare and education costs
• Health insurance and out-of-pocket medical expenses
• Taxes

If your expenses leave you with less than $136.42 per month in disposable income, you qualify for Chapter 7. If you have between $136.42 and $227.50, the court applies a formula: your disposable income times 60 must be less than 25% of your unsecured debt. Above $227.50 per month, you're presumed ineligible,though you can still argue "special circumstances" like major medical bills or caring for a disabled family member.

How to Calculate Your Six-Month Average

Start with the six full calendar months before the month you file. If you file on March 15, use September through February. Add up all income from those six months and divide by six.

Example: You earned $3,000 in September, $4,500 in October, $3,200 in November, $5,000 in December (holiday overtime), $3,800 in January, and $3,500 in February. Total: $23,000. Average: $3,833 per month.

If you got laid off in January and earned nothing in February, those zero-income months bring your average down. If you landed a higher-paying job in January, that bump raises your average even though you were broke for most of the six months.

Income Limits for Married Couples

If you're married, the court generally includes your spouse's income whether or not your spouse is filing with you. There's an exception: if you're legally separated or living apart with no intention to reconcile, you can file individually and exclude your spouse's income.

If your spouse's income pushes you over the median but goes mostly toward separate household expenses,say, your spouse pays for a child from a previous marriage,you may still pass the second part of the means test.

When to Wait Before Filing

If you just lost a high-paying job or took a major pay cut, waiting a few months can improve your numbers. Each month that passes drops the oldest high-income month from your six-month average and adds a new low-income month.

Say you earned $8,000 monthly for five years, then got laid off in February. If you file in March, your average is still around $8,000. If you wait until August, your average includes six months of unemployment or lower wages. That's the difference between a denied case and an approved one.

The opposite is true if you just started a higher-paying job. File sooner to lock in a lower average before the new income kicks in.

Self-Employment and the Means Test

If you run a business, the court uses your gross income minus ordinary and necessary business expenses. "Ordinary and necessary" doesn't mean everything you deduct on Schedule C. Excessive car expenses, dubious home office deductions, and personal spending disguised as business costs get added back.

If your business is losing money, those losses can reduce your household income for means test purposes. But the trustee will scrutinize whether you're genuinely running a business or just racking up hobby expenses.

Can You File Chapter 7 If You Fail the Means Test?

Yes, in rare cases. You can argue "special circumstances" that justify an income above the threshold. Examples include:

• Catastrophic medical bills not covered by insurance
• Supporting an elderly parent or disabled adult child
• Active military service in a combat zone
• Sudden job loss with no unemployment benefits

You need documentation: medical records, care receipts, military orders. The court doesn't grant special circumstances lightly.

If you can't make the case, your alternative is Chapter 13. You'll repay some of your debt over three to five years, but you'll still discharge what's left at the end. Chapter 13 stops foreclosures, lawsuits, and wage garnishments just like Chapter 7 does.

How to Check Your Eligibility Without Hiring a Lawyer (Yet)

Before you pay for a consultation, gather six months of pay stubs, tax returns, and bank statements. Calculate your average monthly income. Compare it to your state's median for your household size.

If you're clearly below the median, you can start preparing your bankruptcy forms. Many people file Chapter 7 without an attorney using guided software. If you're close to the line or above the median, spend $150 to $300 on a consultation. A bankruptcy attorney can spot deductions and exclusions you'd miss.

Not sure where you stand? Take our 2-minute screener to see if Chapter 7 makes sense for your situation.

Common Mistakes That Inflate Your Income Incorrectly

People often include income the court excludes, or forget to deduct business expenses, or count Social Security benefits. Other errors:

• Including a spouse's income when you're legally separated
• Counting tax refunds as income
• Using gross pay instead of net pay for payroll deductions
• Including reimbursed work expenses (mileage, meals, travel)
• Forgetting to average irregular income like bonuses or commissions

Each mistake can push you over the threshold when you actually qualify. Double-check every line.

What to Do If You're Just Over the Limit

If you're $200 or $300 above the median, look for legitimate income exclusions. Did you receive Social Security? Do you have reimbursed business expenses you counted as income? Did you include a one-time payment that shouldn't be in the calculation?

Next, review your allowed expenses for the second part of the means test. Are you paying for health insurance, childcare, or elder care? Do you have a car payment or mortgage? Transportation costs for work? The more you can document, the better your chances of showing minimal disposable income.

If you're still a few hundred dollars short, consider whether waiting a month or two would help. If you're thousands over the median with high discretionary income, Chapter 13 might be your path.

When Chapter 13 Might Be Better Anyway

Even if you qualify for Chapter 7, you might prefer Chapter 13 if you're behind on your mortgage or car loan. Chapter 7 doesn't stop foreclosure long-term,it only delays it. Chapter 13 lets you catch up on arrears over three to five years while keeping the property.

Chapter 13 also protects co-signers. If your parent co-signed your car loan, Chapter 7 wipes out your obligation but leaves your parent on the hook. Chapter 13 shields co-signers while you repay the debt.

The trade-off is time and discipline. You'll make monthly plan payments for years. If you can't commit to that, Chapter 7 is still the right move.