Understanding the Bankruptcy Means Test for Chapter 7 Filing

The Means Test is the “gatekeeper” of Chapter 7 bankruptcy. Passing it requires more than just low income—it requires a strategic calculation of your allowable expenses under IRS standards.

For individuals in New Jersey drowning in debt, Chapter 7 Bankruptcy offers a “fresh start” by wiping out unsecured debts like credit cards and medical bills entirely. However, because this relief is so powerful, Congress created a filter to prevent high-income earners from abusing the system. This filter is called the Bankruptcy Means Test.

At Friscia & Associates, we perform this complex calculation for every client. Many people who think they make too much money to file Chapter 7 are surprised to learn they actually qualify once proper legal deductions are applied.

Step 1: The Median Income Test (The “Easy” Pass)

The Means Test is a two-part calculation. The first part is a simple comparison of your household income against the Census Bureau’s median income for a family of your size in New Jersey.

How it works: We take your average gross income from the last 6 months and annualize it. We then compare it to the NJ median standards (which change approximately every six months).

(Example: As of late 2025, the median income for a single earner in NJ is roughly $85,000, while a family of four is over $163,000.)

If your income is BELOW the median: You automatically pass. You can file for Chapter 7 immediately (assuming you meet other basic requirements).
If your income is ABOVE the median: You do not automatically fail. You simply move on to Step 2.

Step 2: The Disposable Income Test (The “Hard” Pass)

If you earn more than the state median, we must calculate your “Disposable Monthly Income” (DMI). This is where an experienced attorney adds massive value.

We start with your gross income and subtract legally allowed expenses to see what—if anything—is left over to pay creditors. If your final DMI is low enough, you can still file Chapter 7, even if you earn a high salary.

What Expenses Can Be Deducted?

The calculation uses a mix of actual expenses and IRS standard allowances. Deductible items include:

Payroll Taxes: Income tax, Social Security, and Medicare.
Health Insurance: Premiums and out-of-pocket medical costs.
Secured Debts: Mortgage payments and car loan payments are fully deductible. (This often helps homeowners pass the test).
Childcare & Education: Daycare costs and certain educational expenses.
Term Life Insurance: Premiums for you and your spouse.
Charitable Contributions: Verified ongoing donations.

What Happens If I “Fail” the Means Test?

If, after all deductions, the calculation shows you have significant disposable income remaining, a Chapter 7 filing would be considered “presumptively abusive.” In this scenario, the U.S. Trustee would likely move to dismiss your case.

However, this is not a dead end. You simply pivot to a Chapter 13 Bankruptcy.

In Chapter 13, you do not lose assets. Instead, you repay a portion of your debts over a 3-to-5-year plan. The “disposable income” number we calculated in the Means Test helps determine how much your monthly plan payment will be.

The “Marital Adjustment” Nuance

A common question we receive is: “My spouse isn’t filing bankruptcy, but they have a high income. Will that disqualify me?”

Not necessarily. While we must list the household income, we can often use the “Marital Adjustment” to deduct the portion of your spouse’s income that is not used to support you (e.g., their own student loans, support for children from a prior marriage, or their personal debts). This can sometimes bring a household income back under the threshold.

Don’t Assume You Are Disqualified

Online calculators are often inaccurate because they miss the specific local standards and legal deductions that apply to your case. At Friscia & Associates, we run the official Means Test software before we ever file your case.

Find out if you qualify today.
Call us at (973) 500-8024 or (212) 960-8308.

Get a Free Means Test Evaluation

What is the means test?