How Your Expenses Can Help You Pass Bankruptcy’s Means Test

How Your Expenses Can Help You Pass Bankruptcy's Means Test

Richard Fonfrias, J.D.
Chicago’s Financial Rescue & Bankruptcy Lawyer
Fonfrias Law Group, LLC


At times, certain types of expenses work in your favor and help you pass the Chapter 7 Bankruptcy’s mean test.

So if you’re thinking that you earn too much money to pass the Chapter 7 means test, you may still qualify for Chapter 7 bankruptcy. How? You can deduct certain expenses in full, which helps you reduce your disposable income on the means test. An experienced bankruptcy lawyer will be able to assist you in determining exactly what expenses may qualify as deductions.

You May Not Have to Complete the Entire Means Test

Whether you qualify for a Chapter 7 bankruptcy is determined by comparing (1) your average gross monthly income for the six months before filing, to (2) the median income of a similar household in the same state.

Here’s an example:

If your income falls below your state’s median income, then you pass automatically and you do not have to complete the rest of the form. Why? Because the means test concludes that debtors with low incomes have no way to pay their unsecured creditors and are, therefore, not using a Chapter 7 to abuse the system.

If your income rises above your state’s median income, then you must finish the balance of the means test and disclose your expenses to see if you qualify.

How to Use Your Expenses So You Pass the Means Test

If your monthly disposable income is high enough to repay unsecured creditors, then you will not qualify for Chapter 7. Therefore, if you have a high income, you will need high expenses in order to pass the means test.

In order to determine your disposable income, the means test requires that you use both national and local benchmarks for living expenses, rather than the actual amount of your expenses. This is done because debtors might claim that they don’t have money to repay creditors due to costly clothing and meals at expensive restaurants.

Even so, in certain cases you are permitted to claim your actual expenses. These include debts that you are required to pay as well as expenses for your health and welfare. These expenses may reduce your disposable income enough that you would still qualify for a Chapter 7 bankruptcy.

These Expenses May Help You Pass the Means Test

Here are the most common debts that you’re allowed to deduct your actual expenses on the means test.

Income Taxes
Since you must ordinarily pay income taxes, you’re allowed to deduct them from your income on the means test.

Compulsory Deductions
These are deductions that are required for your work, such as mandatory retirement plans, union dues, or uniforms.

Insurance, including Health, Disability or Term Life
You are permitted to deduct the actual amounts you pay for these insurances.

Secured Obligations
These include payments such as your mortgage and your car loan. If your car payment or mortgage is above the national or local averages, you are still allowed to deduct the full amount for the means test.

The means test looks at the full amount you’ll pay in the 60 months following your bankruptcy. Then it averages your monthly payment based on that 60 month period. But if your car or home will be paid off in fewer than 60 months, you may deduct only the 60-month average and not the entire amount of your monthly payment.

Court-Ordered Payments
If the court requires that you pay support obligations, such as alimony or child support, then you may deduct these expenses on the means test.

Child Care Expenses
The amount you pay for child care — such as babysitting, day care, or preschool — may be deducted on the means test.

Health Care
Not counting insurance, if your health care costs for the health and welfare of you or your dependents exceeds the national standard, then you might be able to deduct the actual amount you pay.

Education For Your Employment or a Disabled Child
You are permitted to deduct education expenses of they are required for your job, or for your mentally or physically disabled child.

Charitable Contributions
If you regularly gave money to non-profit causes before your bankruptcy, and if you expect to continue making those donations, then you can deduct them on the means test.

Specialized Care
You can deduct the amount you contribute to the care of an elderly, chronically ill, or disabled family member or person in your home.

Special Circumstances
If you have added expenses for you or your family’s health or welfare due to special circumstances, then you might be able to deduct them if the court is satisfied with your explanation.

When considering bankruptcy, it is always best to consult with a qualified bankruptcy attorney first. Filing for bankruptcy in Illinois? Speak with Rich Fonfrias first.

Offering financial legal services, including bankruptcy, mortgage and loan refinancing, debt consolidation and credit repair foreclosure assistance, foreclosure avoidance, Rich Fonfrias of the Fonfrias Law Group is here to help those with money problems in Illinois. A respected Chicago bankruptcy attorney serving Illinois and the greater Chicago area, Rich Fonfrias, is well-known as Chicago’s financial rescue and bankruptcy lawyer. Your initial consultation with is free.