What If You Don’t Pass the Bankruptcy Means Test?

Quick answer: Failing the bankruptcy means test means your income is too high to qualify for Chapter 7 bankruptcy, and your filing may be considered an abuse of the system. Your options include filing Chapter 13, correcting calculation errors, waiting to retest, documenting special circumstances, or qualifying under the business debt exception.

Failing the Chapter 7 bankruptcy means test can feel like a dead end, but it does not have to be. There are several legitimate paths forward, and understanding each one can help you make the right decision for your financial situation.

What Is the Bankruptcy Means Test, and Why Does It Matter?

The bankruptcy means test determines whether your income is low enough to qualify for Chapter 7 bankruptcy. Chapter 7 allows eligible filers to discharge most unsecured debts quickly, without a lengthy repayment plan.

If your income exceeds your state’s median, you must complete a second calculation comparing your monthly income against allowable expenses. When the result shows that you have enough disposable income to repay creditors, your filing is presumed to be an “abuse of the system” under the U.S. Bankruptcy Code. 

At that point, Chapter 7 is no longer available, unless you can address the failure through one of the options below.

What Are Your Options After Failing the Chapter 7 Bankruptcy Test?

1. Can You File Chapter 13 Instead?

Yes. Chapter 13 bankruptcy is the most common alternative. Rather than discharging debt immediately, Chapter 13 restructures what you owe into a three-to-five-year repayment plan based on your disposable income. It offers meaningful protections, including the ability to stop foreclosure and catch up on missed mortgage payments.

2. Should You Review Your Means Test Calculations for Errors?

Absolutely. Errors in the original means test calculation are more common than people expect. Missed deductions, like high healthcare costs or an adjusted household size, can change the outcome. Reviewing every line item carefully, especially allowable living expenses, may reveal that you actually qualify.

3. Is It Worth Waiting and Retesting?

In some cases, yes. The means test looks at your average monthly income over the past six months. If a temporary job, overtime period, or one-time bonus pushed your income above the threshold, waiting a few months for that income to fall off the calculation window could allow you to pass on a second attempt.

4. What Counts as a Special Circumstance Under the Means Test?

The bankruptcy code allows filers to document special circumstances that justify additional expense deductions. A serious medical emergency, significant job loss, or active military duty are examples that courts have recognized. These circumstances must be supported by documentation and a written explanation submitted with your filing.

5. Does the Business Debt Exception Apply to You?

If more than half of your total debt is business-related rather than personal, the Chapter 7 bankruptcy means test does not apply to you. This exception is significant for self-employed individuals and small business owners whose financial difficulties stem primarily from business obligations.

How to Move Forward With the Right Support

Failing the means test is not the end of your options, but the path forward depends heavily on your specific financial picture. An attorney familiar with bankruptcy law can review your income calculations, identify applicable exceptions, and advise whether Chapter 13 or a retesting strategy better fits your needs.

If you are considering Chapter 7 bankruptcy in Bucks County, Pennsylvania, the Law Office of Michael Schwartz is available to guide you through your options. Contact the Law Office of Michael Schwartz today to schedule a consultation and get clear answers about your situation.

Frequently Asked Questions About the Bankruptcy Means Test

What does it mean to fail the bankruptcy means test?

Failing the Chapter 7 bankruptcy means test means your income exceeds the allowable threshold for your state and household size, and your filing is presumed to be an abuse of the bankruptcy system. You will need to pursue an alternative path, such as Chapter 13.

Can I still file for bankruptcy if I fail the means test?

Yes. Failing the means test disqualifies you from Chapter 7, but you may still file for Chapter 13 bankruptcy, which involves a structured repayment plan rather than an immediate discharge.

How long do I have to wait before retaking the bankruptcy means test?

There is no mandatory waiting period, but it is generally worth waiting until high, temporary income, such as a bonus or second job, is no longer counted in your six-month income average.

Does business debt affect my eligibility for Chapter 7 bankruptcy?

Yes. If more than 50% of your total debt is business-related, you are exempt from the means test entirely and may qualify for Chapter 7 regardless of your income level.