Chapter 7 Income Limits (2024) Bankruptcy Calculator
Bankruptcy Means Testing Median Income Limit Numbers
| State | 1 Earner | 2 People | 3 People | 4 People* |
|---|---|---|---|---|
| Alaska | $82,512 | $98,650 | $114,293 | $131,159 |
| Alabama | $59,605 | $72,419 | $86,685 | $94,373 |
| Arkansas | $54,658 | $67,179 | $77,167 | $90,146 |
| Arizona | $66,340 | $83,660 | $94,526 | $107,944 |
| California | $74,819 | $96,600 | $109,458 | $128,533 |
| Colorado | $77,331 | $101,720 | $120,195 | $135,820 |
| Connecticut | $81,285 | $101,344 | $124,441 | $149,181 |
| District of Columbia | $85,933 | $141,690 | $172,958 | $181,083 |
| Delaware | $75,674 | $92,239 | $104,443 | $128,053 |
| Florida | $62,973 | $77,639 | $89,908 | $104,069 |
| Georgia | $62,468 | $79,803 | $90,959 | $112,675 |
| Hawaii | $78,745 | $94,677 | $113,594 | $133,656 |
| Iowa | $61,283 | $83,592 | $98,987 | $120,308 |
| Idaho | $68,781 | $78,980 | $90,806 | $106,407 |
| Illinois | $66,950 | $86,442 | $105,897 | $125,022 |
| Indiana | $60,351 | $77,580 | $91,431 | $105,581 |
| Kansas | $64,518 | $82,685 | $100,333 | $111,192 |
| Kentucky | $57,509 | $69,905 | $83,622 | $102,067 |
| Louisiana | $53,821 | $66,051 | $77,910 | $97,149 |
| Massachusetts | $81,170 | $103,404 | $127,323 | $161,149 |
| Maryland | $81,293 | $104,569 | $127,386 | $151,138 |
| Maine | $66,369 | $79,644 | $103,965 | $114,591 |
| Michigan | $64,579 | $77,600 | $95,775 | $114,456 |
| Minnesota | $72,319 | $93,855 | $117,426 | $141,903 |
| Missouri | $59,605 | $76,787 | $91,333 | $105,914 |
| Mississippi | $51,554 | $62,496 | $74,909 | $84,767 |
| Montana | $65,242 | $80,779 | $84,585 | $111,516 |
| North Carolina | $61,811 | $78,415 | $89,965 | $109,590 |
| North Dakota | $66,813 | $89,505 | $104,222 | $122,543 |
| Nebraska | $63,813 | $83,412 | $98,600 | $121,455 |
| New Hampshire | $84,017 | $99,807 | $130,391 | $153,749 |
| New Jersey | $83,102 | $100,763 | $130,239 | $157,404 |
| New Mexico | $56,766 | $71,277 | $77,923 | $83,592 |
| Nevada | $64,412 | $81,020 | $88,992 | $99,819 |
| New York | $69,135 | $87,550 | $105,435 | $131,389 |
| Ohio | $61,617 | $77,816 | $94,913 | $113,435 |
| Oklahoma | $55,362 | $71,043 | $82,213 | $91,528 |
| Oregon | $70,266 | $86,269 | $103,282 | $119,432 |
| Pennsylvania | $66,923 | $81,574 | $103,172 | $125,861 |
| Rhode Island | $72,515 | $93,429 | $119,892 | $138,933 |
| South Carolina | $59,661 | $74,874 | $87,940 | $102,244 |
| South Dakota | $63,862 | $83,730 | $97,624 | $113,008 |
| Tennessee | $59,052 | $75,424 | $88,939 | $99,689 |
| Texas | $61,460 | $79,870 | $89,842 | $108,866 |
| Utah | $78,917 | $87,303 | $106,284 | $120,187 |
| Virginia | $75,756 | $95,482 | $116,903 | $139,667 |
| Vermont | $65,712 | $88,215 | $111,980 | $132,356 |
| Washington | $86,558 | $100,800 | $118,442 | $139,828 |
| Wisconsin | $66,106 | $82,346 | $101,490 | $122,571 |
| West Virginia | $57,979 | $64,478 | $83,128 | $90,164 |
| Wyoming | $61,866 | $77,243 | $93,279 | $113,060 |
| Puerto Rico | $27,212 | $27,212 | $32,352 | $43,538 |
| * Add $9,900 for each individual in excess of 4. | ||||
Understanding the Income Limit for Chapter 7 Bankruptcy Cases
Congress added an income limit for Chapter 7 when it revised bankruptcy laws in 2005. BAPCPA (Bankruptcy Abuse Prevention and Consumer Protection Act) changed the way debtors qualified for bankruptcy discharge in Chapter 7.
The purpose of this change was to prevent bankruptcy abuse by limiting Chapter 7 cases to individuals who could not afford to repay any portion of their unsecured debts.
Why Income Limits Are Important in Chapter 7 Cases
The Chapter 7 income qualifications under means testing can prevent you from receiving a bankruptcy discharge. The bankruptcy discharge is why you file a bankruptcy case. A discharge releases you from the legal responsibility to repay a day. Without a discharge, you owe your debts as if you never filed for bankruptcy relief.
That said, the income limit for Chapter 7 does not prevent you from filing a Chapter 7 bankruptcy case. You can file for Chapter 7 regardless of how much money you earn.
However, if your income exceeds the Chapter 7 income limits, you may not be eligible to receive a bankruptcy discharge. In other words, your bankruptcy filing does not result in debt relief. The court can deny your bankruptcy discharge based on abuse. That said, it’s a bit more complicated than that as there are 2 parts of the means test, so some people may still qualify even if there income is above the Chapter 7.
When your income exceeds the maximum income for Chapter 7 bankruptcy cases, you may need to file under Chapter 13 to receive a bankruptcy discharge. The assumption is that if your income is higher than the maximum income for Chapter 7, you can afford to pay a percentage of what you owe to your unsecured creditors.
How to Calculate Income for the Chapter 7 Means Test
The first step is to gather proof of income for the past six months. Income for the Chapter 7 means test is based on income for the six months before you file your Chapter 7 cases. Therefore, if you file your Chapter 7 bankruptcy petition on July 15, you need to report all income from January 1 through June 30.
You can find the exact language to calculate income in this form of the bankruptcy means testing forms.
Which Income is Included in the Chapter 7 Bankruptcy Means test?
Income includes income earned, and income received from all other sources, except income from the Social Security Act and VA Disability Income. Income received from Social Security retirement income, SSDI, and SSI is not included in income for the Chapter 7 Means Test.
Examples of income used for the Chapter 7 Means Test include:
- Wages and salaries, including overtime, bonuses, and commissions
- Net income from self-employment or operation of a business
- Net income from rental property
- Unemployment income
- Workers’ compensation income
- Interest, royalties, and dividends
- Annuities, retirement income, and pensions
- Private disability insurance income
- Child support and spousal support
- Regular income contributed by another person for household expenses, such as a non-filing spouse’s income and money from a roommate, domestic partner, parent, or friend.
Completing the Means Test
Section One – Median Income
There are two terms you need to understand when completing the first part of the Chapter 7 Means Test — current monthly income (CMI) and annual median income. The annual median income is based on your CMI. To calculate CMI, all income received during the six months before filing Chapter 7 is divided by six. Therefore, if your income for six months is $25,000, your current monthly income equals $4,166.67 ($25,000 divided by 6).
The annual median income is calculated by multiplying CMI by 12. In the example above, median income is $50,000.04 ($4,166.67 x 12). Your annual median income is compared to the annual median income for your state (see our chart below). If your median income is lower than the median income for your state, you are presumptively eligible for a bankruptcy discharge under Chapter 7. In other words, you can receive debt forgiveness in Chapter 7 if you meet the other government requirements for filing Chapter 7.
Section Two – Statement of Exemption from Presumption of Abuse
There are certain provisions that may exempt you from the means test altogether. These are related to whether the debts are consumer-related and whether you are a disabled veteran or whether you are or have been a member of the National Guard or a Reservist. See the bankruptcy form, “Statement of Exemption from Presumption of Abuse Under §707(b)(2)” for more information.
Section Three – Disposable Income
If you earn too much income to qualify for Chapter 7 under the median income test, you could see how to pass the Chapter 7 means test under the disposable income test. Disposable income is the amount of money you have each month after deducting your ordinary living expenses and mandatory payroll deductions. In Chapter 13 cases, you may have to include disposable income in your Chapter 13 plan.
See the above median calculator below to see whether you may still qualify for a Chapter 7 bankruptcy even if your income exceeds the median income based on your household size and state.
In a Chapter 7 bankruptcy case, if your disposable income is below a certain level, you can still qualify for a bankruptcy discharge even though your annual median income is higher than the income limit for Chapter 7 bankruptcy. Examples of expenses that may be deducted from CMI to calculate disposable income include:
- Required payroll deductions, such as payroll taxes, uniforms, union dues, and mandatory retirement savings
- Food, clothing, and household expenses
- Car payments, rent, lease payments, and mortgage payments
- Out of pocket healthcare costs
- Health insurance, term life insurance, and disability insurance premiums
- Childcare costs and school expenses for minor children
- Vehicle operating costs or public transportation costs
- Court-ordered child support or alimony payments
The expenses are based on how many people live in your home. Also, some monthly expenses are limited and based on national standards for living expenses. Some of your monthly expenses, such as expensive membership to gyms or golf clubs, may not be used. Also, if your expenses exceed “normal” amounts, you may need to justify and provide proof of the expense. For example, your healthcare costs are very high because your child has a disability.
My Team Member’s Bankruptcy Experience
If your income is below the median, and you’d like to understand the ins and outs of bankruptcy, check out the video series my teammate inspired from his own experience filing Chapter 7 bankruptcy.
Conclusion
The income limit for Chapter 7 is based on the state where you live, the size of your household, and your income level. Hopefully, this article helped you understand how to calculate your annualized income for bankruptcy forms.
You can find the Chapter 7 Bankruptcy Means Test Calculator here to estimate if you qualify for Chapter 7. For additional information about Chapter 7 cases or to find a Chapter 7 attorney near you, contact Ascend.
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