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Calculating Income for the Chapter 7 Bankruptcy Mean Test

Posted by Kridel Law Group | Jun 03, 2020 | 0 Comments

In New Jersey, residents who have incomes that are higher than the state median, but who still wish to file for Chapter 7 bankruptcy and have primarily consumer debts, must pass the Means Test. If a debtor is able to pass this test, he or she will be eligible for a Chapter 7 filing and, as a result, will be able to discharge unsecured debts in the bankruptcy.


According to the Bankruptcy Code, a debtor whose income is lower than the state median for households of the same size is exempt from the Means Test. Disabled veterans who incurred their debt primarily during active duty or while performing homeland defense are also exempt from the Means Test.


To pass the Means Test, debtors must calculate their household income by averaging their monthly income over the six months prior to the planned filing date. This average is then multiplied by 12 to determine annualized median income. If the resulting amount is less than the state median income for a household of the same size, there is a presumption that the Means Test is satisfied. The current median incomes in the State of New Jersey are as follows:

  • One-member households: $62,149.00;
  • Two-member households: $74,367.00;
  • Three-member households: $92,489.00; and,
  • Four-member households: $113,455.00.

For larger households, the debtor should add $8,400 for each individual in excess of four.


If a person's income is higher than the state median, then he or she must complete the Means Test. This requires calculating all sources of income, including income from:

  • The operation of a business;
  • Rental properties;
  • Interests;
  • Dividends;
  • Pensions;
  • Retirement plans;
  • Child support or alimony;
  • Workers' compensation;
  • Gross wages, salary, bonuses, commissions, overtime, and tips;
  • Unemployment; and,
  • Contributions by others to cover household expenses.

There are certain types of income, however, that do not qualify when completing these calculations, such as benefits received from the Social Security Administration (SSA) or payments distributed to victims of terrorism or war crimes.

After collecting this information, the debtor must subtract all, which include costs that are vital to providing for his or her health and welfare. If, after making this calculation, it is determined that a debtor still has enough disposable income to pay off a portion of his or her debts, it is unlikely that he or she will qualify for a Chapter 7 bankruptcy without satisfying one of the exceptions.


Determining whether you are eligible for Chapter 7 bankruptcy relief can be a confusing and time-consuming process. Fortunately, our dedicated New Jersey bankruptcy attorneys are experienced in handling these types of claims, so if you have questions or concerns about filing for bankruptcy, please contact the legal team at Kridel Law Group at (973) 470-0800 to schedule a consultation with an attorney who is well-versed in bankruptcy law.

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