The Bankruptcy Means Test: Do You Qualify for Chapter 7
If you’re considering Chapter 7 bankruptcy in Michigan, understanding the bankruptcy means test is a critical first step in determining your eligibility. The US Trustee’s Office regularly updates income thresholds, and the April 2025 numbers are now available for Michigan residents. These numbers help establish who qualifies for Chapter 7 bankruptcy based on their household size and income level.
In Michigan, the average income levels for the bankruptcy means test are as follows for the April 2025 period:
| Family Size | Income Limit |
|---|---|
| 1 Person | $63,994 |
| 2 People | $78,404 |
| 3 People | $98,800 |
| 4 People | $121,273 |
These figures represent the median income in Michigan for various family sizes. If your household income is below these thresholds, you may qualify to file for Chapter 7 bankruptcy under the means test. However, this test does not solely rely on your gross income. Several deductions may apply, making it more complex than just comparing your income to these figures.
How Does the Bankruptcy Means Test Work?
The bankruptcy means test was designed to prevent higher-income individuals from filing for Chapter 7 bankruptcy. If your income exceeds the median income for your family size, you may not be eligible for Chapter 7 and could be required to file for Chapter 13 bankruptcy instead, which involves a repayment plan.
The means test works by first determining whether your gross income (before taxes and deductions) exceeds the state’s median income levels, based on your household size. If it does, the test doesn’t automatically disqualify you—it will require further calculations, including deductions for living expenses like housing, utilities, transportation, and certain debts.
Important 2025 Means Test Income Figures for Michigan:
For Michigan, the current income limits for Chapter 7 eligibility are:
- 1 Person Household: If your gross income is below $63,994, you may qualify for Chapter 7 bankruptcy.
- 2 People Household: If your gross income is below $78,404, you may qualify for Chapter 7 bankruptcy.
- 3 People Household: If your gross income is below $98,800, you may qualify for Chapter 7 bankruptcy.
- 4 People Household: If your gross income is below $121,273, you may qualify for Chapter 7 bankruptcy.
Note: These are just the income thresholds. Your actual eligibility depends on various factors, including allowable deductions from your income.
What Happens If I Fail the Means Test?
If you file the bankruptcy means test and your gross income exceeds the median income for your household size, it doesn’t automatically disqualify you from bankruptcy. Instead, you will need to proceed with a Chapter 13 bankruptcy.
Chapter 13 is a form of debt relief that involves a repayment plan over 3 to 5 years. This plan allows you to catch up on missed payments and keep assets that might otherwise be liquidated in Chapter 7 bankruptcy. If you’re unable to qualify for Chapter 7, Chapter 13 may still offer a way to resolve your financial issues, but it requires a consistent income and commitment to a structured payment plan.
Why an Experienced Livonia Bankruptcy Lawyer Is Essential for the Means Test
While the bankruptcy means test provides a general guideline for eligibility, it is far from a simple calculation. Many deductions may apply to your gross income—such as child support, medical expenses, and certain unsecured debts—that could reduce your taxable income. These deductions are crucial in determining whether you pass the test and qualify for Chapter 7 bankruptcy.
A Livonia bankruptcy lawyer can help you navigate this complex process. They will ensure that all applicable deductions are properly accounted for, potentially allowing you to qualify for Chapter 7 bankruptcy—even if your gross income initially exceeds the means test threshold.
Attempting to calculate the bankruptcy means test on your own could result in a misunderstanding of your eligibility or missed deductions that could improve your chances of filing for bankruptcy under Chapter 7.
Consult a Livonia Bankruptcy Lawyer Today
If you’re unsure whether you qualify for Chapter 7 bankruptcy under the means test or if you need help calculating your eligibility, it’s crucial to consult a Livonia bankruptcy lawyer. A knowledgeable attorney will guide you through the process and help you determine the best path forward for your financial situation.
At Noble Path Legal PLLC, our attorneys have assisted Metro Detroit bankruptcy clients for nearly 20 years. We provide comprehensive bankruptcy consultations to help you understand your options and navigate the bankruptcy means test. Our experienced attorneys ensure you have the right information to make informed decisions about your financial future.
🔹 Ready to take control of your financial situation? Contact us today to schedule your consultation with a Livonia bankruptcy lawyer and explore your options for Chapter 7 bankruptcy.