Key Takeaways
- The income limit for Chapter 7 in Texas depends on household size, with $94,000 as the limit for a family of four in 2024.
- Your eligibility for Chapter 7 is based on the average of your total income over the past six months.
- If your income exceeds the limit, deductions for expenses like housing and utilities may still allow you to qualify.
- Social Security and certain other types of income are excluded from the means test calculation.
- At Debt Redemption Texas Debt Relief, we offer Texans a specialized debt settlement program, often providing a better alternative to bankruptcy.
Please note that Debt Redemption is not a law firm and does not give legal advice. This article provides general information and should not be considered legal advice. Please seek the advice of an attorney for any legal advice.
Debt Redemption Texas Debt Relief is a trusted debt relief company in Texas dedicated to helping consumers overcome their financial challenges. We offer personalized solutions including a debt settlement program exclusively offered only to Texans, a debt consolidation loan platform to shop for the best rates, and access to credit counseling solutions via our partners, to help you reduce and manage debt effectively. With a commitment to transparency and customer support, Debt Redemption Texas Debt Relief provides free consultations to guide you towards financial freedom.
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Overview of Chapter 7 Means Test
Household Income Comparison
The means test compares your household income to the median income in Texas to determine Chapter 7 eligibility. As of 2024, the median income for a household of four in Texas is approximately $94,000. If your income is below this, you qualify for Chapter 7. If it’s above, further calculations are needed.
Income Calculation Method
The means test uses your total income over the past six months, including wages, bonuses, rental income, and other earnings. Divide the total by six to get your average monthly income. For example, $30,000 over six months results in a $5,000 monthly average.
Pass-Fail Criteria
If your average monthly income is below the median, you pass the means test and can file for Chapter 7 bankruptcy. If it’s above, you’ll need to deduct certain allowable expenses like housing, utilities, and food to see if you still qualify. The goal is to assess if you have enough disposable income to repay some debts through Chapter 13.
Income Limit for Filing Chapter 7 in Texas
Income Limits Based on Household Size
As of 2024, the income limits for filing Chapter 7 in Texas depend on household size:
- 1-person household: $54,000
- 2-person household: $72,000
- 3-person household: $82,000
- 4-person household: $94,000
For households larger than four, add approximately $9,000 for each additional member.
Frequency of Income Limit Updates
Income limits change periodically to reflect cost of living adjustments and economic conditions. Be sure to check the latest figures before filing.
How to Verify Current Income Limits
You can verify current income limits by visiting the U.S. Trustee Program’s website or consulting a bankruptcy attorney. Debt Redemption Texas Debt Relief offers free consultations to help determine if you qualify under the latest limits.
Excluded Income Types
Certain income types are excluded from the Chapter 7 means test calculation. Excluded income includes Social Security benefits, unemployment compensation, and certain disability payments.
For example, if you’re receiving $1,500 per month in Social Security, it won’t be included in the income calculation.
Determining Average Monthly Income
To calculate your average monthly income, add all qualifying income from the past six months (e.g., wages, business income, rental income) and divide by six. Compare this result to the current median income for your household size in Texas, which, as of 2024, is approximately:
- 1-person household: $54,000
- 2-person household: $72,000
- 3-person household: $82,000
- 4-person household: $94,000
For households with more than four members, add approximately $9,000 for each additional person. If your calculated income is below the median for your household size, you pass the means test. If it’s above, allowable expenses (such as housing, utilities, and healthcare) can still be deducted to determine if you qualify for Chapter 7 bankruptcy.
What If Your Income is Above the Limit?
Deductions and Expenses
The means test allows you to deduct expenses like housing, utilities, food, transportation, and healthcare to calculate your disposable income. These deductions help determine if your disposable income is low enough to qualify for Chapter 7.
Statement of Exemption
In certain cases, a bankruptcy attorney may file a statement of exemption to justify a Chapter 7 filing despite higher income. High medical expenses, job loss, or other financial hardships may warrant this exemption.
Alternative Options
If Chapter 7 isn’t an option, Chapter 13 provides a repayment plan. Alternatively, Debt Redemption Texas Debt Relief specializes in debt settlement programs exclusively for Texans. We understand Texas-specific rules and can help secure debt consolidation loans up to $100,000 through our affiliate. Our fees are often up to 40% less than out-of-state services, and program payments are often less than half of minimum credit card payments.
Other Considerations for Chapter 7 in Texas
Legal Residency Requirements
To file for Chapter 7 in Texas, you must have lived in the state for at least 91 of the last 180 days. If you recently moved, you may need to file in your previous state of residence.
Previous Bankruptcy Filings
If you’ve filed for bankruptcy before, time restrictions apply. For Chapter 7, you must wait eight years from your previous Chapter 7 discharge. For Chapter 13, the wait is four years from the Chapter 7 discharge.
Non-Consumer Debt Exemptions
Non-consumer debts, such as business debts and taxes, may affect Chapter 7 eligibility. If over half of your total debt is non-consumer debt, you may qualify for Chapter 7, even if your income exceeds the median limit.
How Debt Redemption Texas Debt Relief Can Help
At Debt Redemption Texas Debt Relief, we specialize in providing debt relief exclusively for Texans. With over 20 years of experience, we understand the unique challenges that come with Texas-specific regulations like the Chapter 7 means test.
Our debt settlement program helps resolve high-interest debt in 12-60 months. We offer free consultations to discuss alternatives to bankruptcy, often providing a better path for managing debt. While debt relief may affect your credit score, it positions you to rebuild your finances and avoid the challenges of passing the Texas Chapter 7 means test.
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Frequently Asked Questions (FAQ)
What is the Texas Chapter 7 Means Test?
The means test determines if your income qualifies for Chapter 7 bankruptcy. It compares your average income over six months to the Texas median for your household size. If your income is below the median, you qualify. If above, allowable expenses are calculated to see if you still qualify.
How often do income limits change?
Income limits change periodically, usually every six months, to reflect cost of living adjustments. Check the latest figures before filing.
What can I do if my income is slightly above the limit?
If your income is above the limit, you can deduct expenses like housing, utilities, food, transportation, and healthcare to lower your disposable income. This may help you qualify for Chapter 7.
Are there different rules for non-consumer debts?
Yes. If more than half of your total debt is non-consumer, such as business debts or tax obligations, you may qualify for Chapter 7 regardless of your income.
Can I include social security in my income calculation?
No, Social Security benefits are excluded from the means test calculation, which lowers your average income and may help you qualify for Chapter 7.
How do I prove my income for the means test?
Provide documentation of all income sources from the past six months, including pay stubs, bank statements, and tax returns.
What deductions can I take into account?
You can deduct expenses like housing, utilities, food, transportation, and healthcare. These deductions reduce your disposable income and may help you qualify for Chapter 7.