Using Deductions to Pass the Chapter 7 Means Test

 Posted on February 05, 2025 in Bankruptcy

If you have decided to file for Chapter 7 bankruptcy, or even if you are just considering filing for bankruptcy, you may be wondering whether there are eligibility requirements, and if so, what they are. To file for Chapter 7 bankruptcy, you must pass the "means test." which calculates your monthly income.

The results of the means test must show that your gross income is below bankruptcy income limits. However, even if you do not at first pass the means test and your income is higher than the allowed income, you can still qualify for Chapter 7 by deducting the cost of certain allowed expenses. An experienced North Carolina Chapter 7 bankruptcy attorney can help you find out if you qualify for Chapter 7 bankruptcy.

How Do You Pass the Chapter 7 Means Test?

Unless you are exempt from the means test (for example, if you owe more business debt than personal debt or qualify based on your military status), you must pass the means test. To do so, you will calculate your average monthly income for the last six months as instructed on the bankruptcy means test form. If the number is below the median income for your household size in North Carolina, you have passed the Chapter 7 means test and qualify to wipe out your debt via Chapter 7 bankruptcy.

What Expenses Can You Deduct to Pass the Means Test?

If your income after taking the means test falls above the bankruptcy income limits you may deduct certain allowed standard and actual expenses from your income to bring your income number down and pass the means test. There are a few types of deductible expenses:

National Standard Expenses

These deductions have predetermined amounts set out by the Internal Revenue Service (IRS). The national standard expense deductions include deductions for food, housekeeping supplies, clothes, personal care products, services, other miscellaneous items, and certain out-of-pocket healthcare expenses.

Local Standard Expenses

These are also predetermined amounts for your minimum deduction for the cost of housing, utility, and transportation expenses. They are determined by state, local, and Bureau of Labor Statistics (BLS) data.

Other Necessary and Additional Expenses

These are determined based on the actual amount you pay rather than standard amounts and include:

• Tax obligations

• Health and life insurance

• Mortgage and car loans

• Court-mandated payments such as child support

• Childcare expenses

• Contributions to charity

Contact a Mecklenburg County, NC Bankruptcy Attorney 

Congratulations on making the difficult decision to file for bankruptcy! At Blossom Law PLLC, we understand that bankruptcy can be the first step to getting your financial life in order. Our experienced Belmont, NC Chapter 7 bankruptcy attorney can advise you on how you may qualify for Chapter 7 bankruptcy by passing the means test or deducting any expenses to qualify. Call our office at 704-256-7766 for a complimentary consultation today.