What Is the Chapter 7 Means Test?

If you’re struggling with overwhelming debt in Arlington, Fort Worth, or anywhere in the Dallas-Fort Worth metroplex, Chapter 7 bankruptcy may offer a path to a fresh financial start. But before you can file, you’ll need to pass what’s known as the means test — a calculation that determines whether your income is low enough to qualify for Chapter 7 debt relief.

The means test was introduced by Congress under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) to prevent higher-income filers from using Chapter 7 to discharge debts they could realistically repay. For Texas residents, the test uses state-specific income thresholds and allowable expense deductions that can significantly affect your eligibility.

At Machi Wright & Associates, attorney Daniel Wright has guided hundreds of North Texas families through the means test process. This guide explains exactly how the test works, what the current income limits are for Texas, and what your options are if you don’t pass.

Step 1: Comparing Your Income to the Texas Median

The first part of the means test is straightforward. You calculate your current monthly income (CMI) — the average of all gross income you received during the six full calendar months before your filing date. This includes wages, salary, tips, bonuses, unemployment compensation, rental income, pension and retirement distributions, and contributions from others in your household.

Your CMI is then annualized (multiplied by 12) and compared against the Texas median household income for a household of your size. As of the most recent data used in 2026 filings:

  • 1-person household: approximately $58,886
  • 2-person household: approximately $75,820
  • 3-person household: approximately $82,637
  • 4-person household: approximately $99,258

For each additional household member beyond four, you add roughly $9,900 to the threshold. These figures are updated periodically by the U.S. Trustee Program using Census Bureau data, so the exact numbers applicable to your case depend on your filing date.

If your annualized income falls below the Texas median for your household size, you pass the means test automatically. No further calculation is required, and you can proceed with your Chapter 7 filing.

Step 2: The Full Means Test Calculation

If your income exceeds the Texas median, that doesn’t necessarily disqualify you. You move to the second part of the means test, which deducts specific allowable expenses from your CMI to determine your disposable income. These deductions fall into several categories:

IRS National Standards

The IRS publishes national standards for food, clothing, housekeeping supplies, personal care, and miscellaneous expenses. These are fixed amounts — you claim them regardless of what you actually spend. For a single filer, the 2026 national standard for these living expenses is approximately $785 per month.

IRS Local Standards

Housing and transportation expenses use IRS Local Standards, which vary by county. For Tarrant County (Arlington, Fort Worth) and Dallas County (Dallas), these standards reflect the higher cost of living in the DFW metroplex compared to rural Texas. Housing allowances cover mortgage or rent payments plus utilities, while transportation covers vehicle ownership costs and operating expenses.

Actual Expense Deductions

Beyond the IRS standards, you can deduct certain actual expenses that are necessary and reasonable. These include:

  • Health insurance premiums and out-of-pocket medical costs beyond the IRS allowance
  • Court-ordered payments such as child support or alimony
  • Childcare and dependent care costs necessary for employment
  • Mandatory payroll deductions (taxes, Social Security, Medicare)
  • Term life insurance premiums
  • Education expenses for dependent children (up to $208.33 per child per month)
  • Telecommunications and internet services
  • Secured debt payments (car loans, mortgage arrears)
  • Priority debt payments (tax debts, domestic support obligations)

The Disposable Income Calculation

After subtracting all allowable deductions from your CMI, if your remaining monthly disposable income is less than approximately $234 per month (or the equivalent annual threshold), you pass the means test. If it falls between roughly $234 and $391, your eligibility depends on whether that amount would pay at least 25% of your unsecured debts over a 60-month period. Above $391 per month in disposable income, you are presumed to be abusing Chapter 7 and will likely need to consider Chapter 13 bankruptcy instead.

Special Rules and Exemptions That Texas Filers Should Know

The Texas Homestead Exemption Advantage

Texas has one of the most generous homestead exemptions in the country. Under Texas Property Code §41.001, your primary residence is exempt from creditors with virtually no limit on value (provided the property is 10 acres or less in an urban area, or 100 acres for a family in a rural area). This means filing Chapter 7 in Texas often lets you keep your home — a significant advantage over states with capped homestead exemptions.

For DFW homeowners in Arlington, Fort Worth, or Dallas, this exemption is particularly valuable given the region’s appreciation in property values over the past decade.

Military Service Members

Active-duty military personnel and National Guard members called to active duty may be exempt from the means test entirely under certain conditions. If you’ve served on active duty for at least 540 days in the four years preceding your filing, the means test does not apply.

Primarily Non-Consumer Debt

If more than half of your total debt is business debt rather than consumer debt (credit cards, medical bills, personal loans), you may be exempt from the means test. This exception is particularly relevant for small business owners and entrepreneurs in the DFW area who accumulated debt through a failed business venture or SBA loan default.

Social Security Income Is Excluded

An important benefit for older filers and those receiving Social Security Disability (SSD) benefits: Social Security income of any kind — retirement, disability, or survivor benefits — is excluded from the means test calculation entirely. If Social Security represents all or most of your income, you will likely pass the means test easily.

What Happens If You Fail the Means Test?

Failing the means test doesn’t mean bankruptcy is off the table. It means that Chapter 7 liquidation bankruptcy carries a presumption of abuse given your income level. You have several options:

1. File Chapter 13 Instead

Chapter 13 bankruptcy allows you to keep all your property while repaying a portion of your debts through a court-supervised 3-to-5-year repayment plan. Your monthly plan payment is based on your disposable income — the same figure calculated in the means test. Many DFW families who earn above the median income find that Chapter 13 provides meaningful relief by reducing unsecured debt obligations and stopping creditor harassment, wage garnishments, and foreclosure proceedings.

2. Rebut the Presumption of Abuse

In rare circumstances, you can argue that special circumstances justify Chapter 7 filing despite failing the means test. This might include a serious medical condition requiring expensive treatment, a job loss that occurred after the six-month lookback period, or the loss of a spouse’s income due to military deployment. You’ll need to provide detailed documentation and the standard is rigorous.

3. Wait and Refile

Because the means test uses a six-month income lookback, a temporary spike in income (such as a severance package, overtime period, or seasonal work) can push you over the median. If your current income has since dropped, waiting a few months until the high-income months roll off the lookback window may bring you back below the threshold.

Common Mistakes DFW Filers Make on the Means Test

In our experience serving Arlington, Fort Worth, and Dallas bankruptcy clients, attorney Daniel Wright sees several recurring mistakes that can derail an otherwise qualifying Chapter 7 case:

  • Forgetting to include a spouse’s income. Even if you’re filing individually, your spouse’s income is included in the CMI calculation unless you are legally separated or living apart. In a two-income DFW household, this can push your combined income above the median when your individual income would have passed.
  • Missing allowable deductions. Many filers don’t realize they can deduct health insurance premiums, mandatory retirement contributions, education expenses for dependents, and other costs. These deductions can reduce your disposable income enough to pass the second part of the test.
  • Using the wrong household size. Your household size isn’t always the same as the number of people on your tax return. Dependents who live with you, even if not claimed on taxes, may count. A larger household size means a higher median income threshold — which works in your favor.
  • Timing the filing poorly. If you received a large bonus, tax refund, or insurance settlement within the last six months, it inflates your CMI. Strategic timing — filing after the high-income month drops out of the lookback window — can make the difference between passing and failing.

How an Experienced Texas Bankruptcy Attorney Can Help

The means test involves dozens of line items, IRS standards that change periodically, and strategic decisions about timing, household composition, and expense classification. A small error in any of these areas can mean the difference between a straightforward Chapter 7 discharge and a more complex — and more expensive — Chapter 13 case.

At Machi Wright & Associates, Daniel Wright works with bankruptcy clients throughout the Dallas-Fort Worth area, including Arlington, Fort Worth, Dallas, Grand Prairie, Mansfield, and surrounding communities. With years of experience navigating Texas bankruptcy law, Daniel provides clear guidance on whether Chapter 7 or Chapter 13 is the right path for your specific financial situation.

Take the First Step Toward Debt Relief

If you’re considering bankruptcy and wondering whether you’ll pass the means test, don’t try to figure it out alone. The calculation is technical, and the consequences of filing under the wrong chapter can cost you time and money.

Contact Machi Wright & Associates today for a confidential consultation. We’ll review your income, expenses, and debts, run the means test calculation, and explain your options clearly — so you can make an informed decision about your financial future.

Call (817) 264-5800 or visit our contact page to schedule your free consultation. We serve clients throughout Arlington, Fort Worth, Dallas, and the entire DFW metroplex.