You can eliminate debt and regain financial stability. About 95% of filers pass at least one of the two steps of the means test, so most people who want to file Chapter 7 do qualify. Since 2005, the federal bankruptcy code has required the means test to make sure Chapter 7 is available for those who truly need it, not those who can afford to pay back a reasonable amount of debt. Nick Thompson has guided Louisville-area filers through the means test since the rule took effect in 2005. We analyze your income, expenses, and circumstances to find your best path forward, and we take fewer than 20 cases per month so every petition gets real attention.
What Is the Bankruptcy Means Test?
The means test is a two-step calculation that checks whether your monthly income is low enough to qualify for a Chapter 7 debt discharge. It is rare to need Chapter 7 and not pass. The test mainly affects the top 2 to 3% of wage earners. It does not use your average annual income. Instead, it averages your prior 6 months of income to find your Kentucky median income figure. You can still pass even if you do not pass the first step.
How the Two-Step Means Test Works
Step 1: The Median Income Test. We compare your household monthly income to the median monthly income of similar-sized Kentucky households. If you are below the median, you automatically pass and qualify for Chapter 7. Remember that not all income counts toward this step (see below).
Step 2: The Disposable Income Test. If your income is above the median, we run a detailed expense analysis. You can still qualify if your reasonable and necessary expenses leave you with $150 or less in monthly disposable income to pay unsecured non-priority creditors. If what is left would pay back little to nothing over five years in a Chapter 13 plan, you qualify for Chapter 7.
To calculate qualifying income, the court averages your total household monthly income from the six calendar months before you file. The month you file is not counted. We then annualize that figure. Example: if you file in October, we use income from April 1 through September 30. The U.S. Trustee updates the median figures periodically, and we use the most current numbers for your case.
Kentucky Median Income Thresholds
Kentucky median income figures are set by household size and published by the U.S. Trustee Program. For cases filed on or after April 1, 2026, the figures are:
| Household Size | Kentucky Annual Median Income |
| 1 person | $61,652 |
| 2 people | $73,892 |
| 3 people | $85,212 |
| 4 people | $109,443 |
| Each additional person, add | $11,100 |
If your annualized income is below the figure for your household size, you pass step one. These numbers change periodically, so the exact figure for your filing date should be confirmed against the current U.S. Trustee Program means test data.
Income That Does Not Count Toward the Means Test
Not all income counts toward the means test. Several categories are left out of the calculation:
- Social Security benefits are excluded under 11 U.S.C. § 101(10A). This includes retirement, SSDI, and SSI.
- Most disability benefits are excluded.
- Payments to victims of war crimes or crimes against humanity are excluded.
- Some VA benefits are excluded when certain rules apply.
- Income from a spouse who is not filing may be partly included or excluded, depending on shared household expenses.
Means Test Exceptions: When Income Is Not a Barrier
The means test is only a legal presumption that your filing is an abuse of the system. You may be still be exempt from the test or can overcome the presumption if you meet certain criteria.
- Primarily Business Debt: If more than 50% of your total debt is business debt (not consumer debt), the means test does not apply to you.
- Disabled Veterans: Veterans who incurred most of their debt while on active duty or performing a homeland defense activity are exempt from the means test.
- Sudden Change in Circumstances: A recent event like a sudden disability, loss of a spouse’s income, or retirement may allow you to file Chapter 7, even if your prior six months of income were high. We can present evidence to the court to overcome the presumption against filing.
Special Circumstances: Passing Chapter 7 With Above-Median Income
If your income is above the Kentucky median, you can still pass Chapter 7 through documented special circumstances under 11 U.S.C. § 707(b)(2)(B). Common examples include a recent job loss, a medical condition that needs expensive ongoing treatment, an unusual but unavoidable expense the standard allowances do not cover, or a serious change in household size. Special circumstances must be documented and justified to the U.S. Trustee.
Filers Who Do Not Have to Take the Means Test
Some filers do not have to take the means test at all. Disabled veterans whose debts were incurred mostly during active duty are exempt under 11 U.S.C. § 707(b)(2)(D). Reservists or National Guard members called to active duty for at least 90 days are exempt during their service and for 540 days afterward. Filers whose debts are primarily business debts, meaning more than 50% of the total, are also exempt. That business-debt path is explored further on the small business bankruptcy page.
Strategic Timing: Filing for Maximum Benefit
Timing your filing can be crucial. Because the means test uses a six-month look-back, you may qualify by waiting for a period of lower income. This can happen if you file while you are:
- Unemployed or underemployed.
- Back in school.
- On maternity or family leave.
- Experiencing a seasonal dip in income.
If your income dropped recently, a short delay can shift the six-month window to a lower average and help you qualify.
Overlooked Expenses That Help You Qualify
Even above-median earners should deduct every necessary expense. Missing these is a common mistake that can disqualify you or increase a Chapter 13 payment:
- Secured debt payments: your actual mortgage and car payments are deducted, even if higher than the standard IRS amounts.
- Dependent expenses: childcare, daycare, school lunches and fees, and court-ordered support.
- Healthcare and insurance: health premiums, ongoing medical costs, and even pet care. Unusually high medical costs may need documentation.
- Taxes: the income tax you are required to pay annually, even if you currently withhold less.
- Retirement contributions: reasonable 401(k) contributions and loan repayments, if you have a history of making them.
- Charitable donations: donations to church or charity, if you have a history of giving.
Want to know which step you pass? Call 502-625-0905 for a free means test review.
Chapter 7 vs. Chapter 13: Making the Right Choice
If you fail the means test, you can still file bankruptcy; it just means Chapter 13 if you fail the means test. Many debtors choose Chapter 13 even when they qualify for Chapter 7 bankruptcy in Louisville, because it offers benefits for specific goals. Choose Chapter 13 if you need to:
- Stop foreclosure: catch up missed mortgage payments over a 3- to 5-year plan to keep your home.
- Strip a second mortgage: remove a second mortgage or HELOC if the home is worth less than the first mortgage balance.
- Manage non-dischargeable debt: pay priority debts like certain income taxes and support over time without interest.
- Protect co-signers: a Chapter 13 plan can protect a co-signer on a consumer debt.
- Keep non-exempt property: keep property you might lose in Chapter 7. See the Kentucky bankruptcy exemptions for what is protected.
Chapter 13 Debt Limits
You can only file Chapter 13 if your debts are below the federal limits. For cases filed on or after April 1, 2025, you must owe less than $526,700 in unsecured debt (such as credit cards and medical bills) and less than $1,580,125 in secured debt (such as mortgages and car loans).
Be Wary of “Chapter 13 Loading”
Some offices push clients into Chapter 13 cases, where the attorney fee is often higher. About 70% of bankruptcy cases nationwide are Chapter 7s. If an attorney tries to talk you into Chapter 13 without a clear, verifiable reason that benefits you, such as saving your home, ask questions. We recommend the chapter that best serves your goals.
Frequently Asked Questions
Q: What happens if I fail the means test?
You cannot file Chapter 7. Chapter 13 becomes your option if you need bankruptcy protection. Chapter 13 reorganizes debt over 3 to 5 years and is often the better fit for filers with above-median income, mortgage arrears, or non-dischargeable tax debt.
Q: Do Social Security benefits count toward the means test?
No. Social Security benefits are excluded under 11 U.S.C. § 101(10A). This includes Social Security retirement, Social Security Disability Insurance (SSDI), and Supplemental Security Income (SSI).
Q: My spouse will not file. Does her income count?
Partially. The non-filing spouse’s income is included in household income for the median comparison. Reasonable spousal expenses that are not the filer’s responsibility may be deducted in step two. The math is case-specific.
Q: Can I retake the means test if my income changes?
Yes. The means test uses a 6-month look-back from the filing date. If you wait for two or three months of lower income to fall into the look-back window, the math can change. Timing the filing date is part of the consultation.
Q: Do you handle means test cases in counties outside Jefferson?
Yes. The office handles means test analysis and bankruptcy filings for clients in Jefferson, Oldham, Bullitt, Spencer, Nelson, and Meade counties. All Western District of Kentucky cases are filed at Gene Snyder Courthouse in Louisville.
Run Your Kentucky Means Test in a Free Consultation
Nick Thompson personally runs the means test calculation during the free consultation. The math takes about 30 minutes once your income and expense documents are ready. Call 502-625-0905 or schedule a free means test review online. Same-day and next-day appointments are often available.
About Nick C. Thompson, Louisville Kentucky Bankruptcy Attorney
Nick C. Thompson has represented clients in the Louisville area for over 30 years, focused exclusively on bankruptcy and foreclosure defense. Unlike larger, high-volume firms, Nick personally spends a minimum of four to six hours preparing your petition. He never hands you off to an inexperienced junior attorney or paralegal. That commitment to quality petitions results in less property lost, lower Chapter 13 plan payments, and more debt discharged. Nick is also the author of the free Kentucky Foreclosure Manual.