Look, bankruptcy is stressful enough without drowning in legal jargon. If you’re sitting there with assets, income, and debt that doesn’t fit the typical “broke person files bankruptcy” narrative, you’re probably wondering if Chapter 7 is even an option.
Here’s the thing—it might be. Even if your income looks too high at first glance.
This guide cuts through the confusion with actual numbers, real strategies, and practical advice from the attorneys at Farmer & Wright who’ve helped plenty of high earners navigate this exact situation. No fluff, just what you need to know.
The Chapter 7 Means Test: What You’re Really Up Against
Chapter 7 Income Requirements (The Basics)
Think of the Chapter 7 income limit as a financial gateway. If your household income falls below your state’s median for a family your size, you’re basically golden. The court assumes you need the relief.
The U.S. Trustee Program sets these limits annually, comparing your average monthly income over the past six months to your state’s median. Simple enough, right?
Here’s where it gets interesting for higher earners: being above the median doesn’t automatically disqualify you. It just means you have to prove you can’t afford a Chapter 13 repayment plan after accounting for necessary expenses.
How the Means Test Actually Works
The means test isn’t trying to trick you—it’s trying to figure out if you have money left over each month to pay creditors.
Two main steps:
- Income check: Are you above or below your state’s median?
- Expense calculation: If you’re above, what’s left after legitimate monthly expenses?
Pass the first test? You’re done. Fail it? Time for some math.
The expense calculation uses IRS-approved categories: housing, food, transportation, healthcare, taxes, and other mandatory payments. Get creative here (legally), and you might find that “high” income suddenly doesn’t look so high anymore.
Real example: One of Farmer & Wright’s clients appeared way over the income limit as a consultant. But after documenting business expenses, medical costs for an elderly parent, and transportation costs for a disabled child, their disposable income dropped below the threshold. Chapter 7 it was.
2025 Income Limits by State (The Numbers You Need)
Here’s what you’re working with for 2025:
| State | 1 Person | 2 People | 3 People | 4 People |
|---|---|---|---|---|
| Kentucky | $50,833 | $63,750 | $71,250 | $82,083 |
These are annual figures. Under these amounts? You’re likely good to go. Over them? Time to dig deeper.
Making Your Expenses Work for You
What You Can Actually Deduct
This is where things get interesting. The IRS gives you categories of necessary expenses that reduce your “disposable” income:
- Housing costs: Mortgage, rent, property taxes, insurance, utilities
- Food and clothing: Standard allowances based on family size and location
- Transportation: Car payments, insurance, gas, maintenance
- Healthcare: Insurance premiums, out-of-pocket costs, ongoing treatments
- Taxes: Income taxes, Social Security, mandatory retirement contributions
- Life insurance: Term life premiums for family protection
- Court-ordered payments: Child support, alimony
The trick? Most people miss deductions they’re entitled to. Private school tuition (if you were paying it before filing), extraordinary medical expenses, necessary business costs—these add up fast.
Strategies That Actually Work
Strategic documentation isn’t about gaming the system. It’s about making sure you get credit for every legitimate expense.
Business owners: Equipment payments, professional insurance, business vehicle costs. If you need it to generate income, it probably counts.
Secured debt payments: That car loan and mortgage? They reduce your disposable income dollar for dollar.
Medical situations: Ongoing care costs, expensive prescriptions, therapy for family members—document everything.
Family obligations: Childcare, eldercare, transportation costs for dependents with special needs.
As Todd Farmer from Farmer & Wright puts it: “We often see clients who think they make ‘too much’ money, but they’re supporting aging parents, have kids with special needs, or run businesses with significant monthly obligations. These aren’t luxuries—they’re necessities that the law recognizes.”
Want to know if you’re missing something? A personalized review beats guessing every time.
When You’re “Over the Limit” (But Maybe Not Really)
Special Circumstances That Change Everything
Income over the median doesn’t mean game over. Several exceptions can flip your case:
Medical emergencies: Sudden, major medical expenses that blow up your budget can justify deviation from standard calculations.
Job loss or income cuts: Lost your job recently? Took a pay cut? The court might look at your current situation rather than the past six months.
Military exceptions: Active duty personnel and disabled veterans get special consideration, especially for service-connected issues.
Business debt situations: If most of your debt comes from business operations rather than personal spending, different rules apply.
The key? Documentation. Lots of it. Medical records, termination letters, service records, business financial statements—whatever proves your special circumstances are real.
Veterans, Disabled Individuals, and Business Owners
Some folks get special treatment under the law—and rightfully so.
Veterans: Disabled veterans whose debt stems from active duty periods may bypass the means test entirely. Service-connected disabilities that create ongoing expenses also factor into calculations.
Disabled individuals: Social Security Disability recipients often qualify for modified means testing, especially when disability-related costs eat up their income.
Business debt filers: Here’s a big one—if more than 50% of your debt is business-related, the means test might not apply at all. This helps entrepreneurs whose personal guarantees on business loans created their debt problems.
Case in point: Farmer & Wright recently helped a disabled veteran who was slightly over the income limit but had ongoing medical costs from service injuries. Result? Full Chapter 7 discharge while keeping his home and vehicle.
What If Chapter 7 Isn’t Happening?
Chapter 13: The Alternative That Might Be Better
Chapter 13 isn’t Chapter 7’s disappointing cousin. For high-income, high-asset folks, it might actually be the better choice.
Key differences:
| Feature | Chapter 7 | Chapter 13 |
|---|---|---|
| Timeline | 4-6 months | 3-5 years |
| Asset protection | Limited to exemptions | Keep most assets |
| Monthly payments | None after filing | Required throughout |
| Debt discharge | Most unsecured debt gone | Remaining debt wiped after completion |
Chapter 13 lets you keep assets that Chapter 7 would liquidate. That house with way more equity than your state exemption allows? Keep it. Multiple vehicles? Keep them. Just make payments on a court-approved plan.
It’s not just about keeping stuff, either. Chapter 13 can strip second mortgages, catch up on mortgage arrears, and even reduce certain secured debts.
Other Options Worth Considering
Sometimes bankruptcy isn’t the answer. Or it’s part of a bigger strategy.
Debt management plans: Work with credit counseling to negotiate lower payments. No legal protection, but also no bankruptcy on your credit report.
Asset protection trusts: For substantial wealth, trusts can shield assets from future creditors. Requires advance planning and won’t help with existing debts.
Negotiated settlements: Direct deals with creditors for lump-sum payoffs at reduced amounts. Works if you have settlement funds available.
Strategic combinations: Sometimes the best approach combines multiple strategies. Farmer & Wright specializes in these hybrid solutions for clients who don’t fit standard molds.
Tools to Figure Out Where You Stand
Free Calculator and Assessment
Wondering if you qualify? Farmer & Wright’s online calculator gives you real-time results based on current data and your specific situation.
Why it’s better than static tables:
- Updates automatically with new federal data
- Accounts for state-specific variations
- Incorporates attorney insights on potential deductions
It’s free, it’s accurate, and it’ll give you a realistic picture of your options in about five minutes.
Why Professional Review Matters
Even with good tools, it’s easy to miss crucial details. Common mistakes include:
- Missing legitimate deductions: Medical costs, family obligations, business necessities
- Income calculation errors: Using wrong time periods or income types
- Poor documentation: Can’t prove expenses during trustee review
- Bad timing: Filing when income fluctuations work against you
Professional review catches these issues before they become problems. Farmer & Wright has turned plenty of initial “no” answers into successful Chapter 7 cases through proper documentation and legal strategy.
One client said it best: “I thought my income was way too high, but they found deductions I didn’t even know existed. What looked impossible became straightforward with the right guidance.”
Your Most Pressing Questions
What are the 2025 income limits for Chapter 7?
Depends on your state and household size. Kentucky families of four qualify under $105,955 annually, while California families have a $119,500 threshold. These reflect regional cost differences and update yearly.
How does the means test work?
It compares your income to your state median, then calculates disposable income after necessary expenses. Above median doesn’t mean disqualified—it means more paperwork.
What if I’m over the income limit?
Strategic expense documentation, special exemptions, or Chapter 13 might still work. Many “over-income” filers qualify through proper legal guidance.
Can high earners pass the means test?
Absolutely. Document every allowable expense, leverage available exemptions, and get professional help with strategy. Business owners, caregivers, and those with medical expenses often find qualification paths.
Do any states skip income limits?
All states use the means test, but exemptions and special circumstances vary significantly. Some situations effectively bypass normal income restrictions.
Take Control of Your Financial Future
Chapter 7 income limits aren’t roadblocks—they’re starting points. With proper expense documentation, strategic use of exemptions, and professional guidance, many high earners find paths to qualification they didn’t know existed.
The difference between success and failure often comes down to knowing what expenses count, how to document them properly, and when to file for maximum advantage.
Ready to see what’s actually possible with your situation? Farmer & Wright offers confidential reviews that cut through the confusion and give you real answers about your options.
Because here’s the truth: your financial situation is probably more complex than any online calculator can handle, and your relief options are probably broader than you realize.
Want to know for sure where you stand? Contact Farmer & Wright for a confidential assessment that looks at your complete picture—income, assets, expenses, and goals. No generic advice, just strategy tailored to your specific situation. Farmer & Wright represents people in every county in Kentucky. We have represented more people in Kentucky the last five years than any other firm. Experience matters.
Isn’t it time to stop wondering and start knowing?
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