NJ Bankruptcy Means Test
Determine bankruptcy eligibility across New Jersey.
The Importance of the NJ Bankruptcy Means Test: Are You Eligible for Chapter 7?
If you are considering Chapter 7 bankruptcy in New Jersey, the means test is the first step to determine whether you qualify. In simple terms, if your household income is below the New Jersey median for your family size, you likely pass. If it’s higher, you may still qualify after deducting allowed expenses that show you have little to no disposable income. Either way, the bankruptcy means test helps the court determine whether Chapter 7 is the appropriate option or if Chapter 13 is a better fit for you.
At the Law Offices of Wenarsky and Goldstein, LLC, we can guide you through this process. We can explain how the test works, gather the necessary documents, and calculate your income and expenses to determine eligibility. Our team is ready to help you evaluate Chapter 7 and Chapter 13 options so you can move forward with confidence.
Contact us today to learn more about the means test and bankruptcy eligibility.
What is the Bankruptcy Means Test?
The means test is a standardized calculation that helps the court determine whether you qualify for Chapter 7 bankruptcy.
Congress created it in 2005 to ensure Chapter 7 is reserved for those who truly cannot afford to repay their debts. The test compares your average income over the six months before filing to the New Jersey median income for a household of your size. If your income is under the median, you generally pass. If it’s above, the test shifts to a second phase where you deduct allowed expenses to determine how much disposable income you have left.
Moreover, the means test aims to direct people with the ability to repay some of their debts toward Chapter 13, while allowing those with limited resources to receive a Chapter 7 discharge.
Here’s how the process works in New Jersey:
- Income Comparison: We can help you compare your six-month average income to the median income figures for New Jersey, adjusted for your household size.
- Expense Deductions: If you are above the median, we then calculate allowed expenses (based on IRS standards and actual costs for certain items) to determine your disposable income. If the number is low enough, you may still qualify for Chapter 7.
Exceptions may apply for certain military members, disabled veterans with service-related debts, and individuals whose debts are primarily business-related rather than consumer debts. If more than 50% of your total debt is business-related (not consumer debt), you may be exempt from the means test regardless of income. Naturally, we can evaluate these exceptions when we review your case.
Income Limits and Calculations for NJ Means Test
The bankruptcy means test starts with your “current monthly income” (CMI). This is your average gross income from all sources during the six months before you file. It’s not the same as your actual take-home pay, and it may not match what you think of as your “monthly income.” We can help you calculate it accurately and ensure all required sources are either included or excluded as the law requires.
Understanding the threshold:
- Median income levels change over time. According to the latest figures (May 2025), median income amounts in New Jersey are $84,257 for one person, $102,903 for two people, $131,173 for a family of three, and $163,110 for a family of four. These numbers are adjusted periodically.
- If your CMI is at or below the median for your household size, you typically pass the bankruptcy means test without moving to the second phase.
- If your CMI is above median, you proceed to the expense-deduction phase. Many people still qualify for Chapter 7 at this stage after accounting for allowable expenses.
How the Current Monthly Income Is Calculated
Your CMI includes most regular sources of income you received during the six-month lookback period, such as:
- Wages, salary, overtime, commissions, bonuses
- Self-employment or business income (after reasonable business expenses)
- Rental income
- Interest, dividends, royalties
- Unemployment benefits
- Pension and retirement income
- Workers’ compensation and state disability insurance
- Regular contributions from others to household expenses
Equally important, the following income is excluded from CMI:
- All Social Security benefits (retirement, disability, and SSI)
- Some payments to victims of terrorism or war crimes
- Tax refunds related to the earned income credit or the additional child tax credit
Additionally, it’s crucial to consider fluctuating income. Seasonal work, temporary overtime, or recent job changes can skew the six-month average. If your income dropped recently, you may choose to delay filing so the lookback period better reflects your current reality. For example, a recent decrease in income might help you qualify, while an increase might make qualification more difficult. Bonuses, commissions, or seasonal work can create spikes that also affect the means test.
We can map the timeline, month by month, to identify the most favorable filing window.
Allowable Expense Deductions
If your income exceeds the New Jersey median, you can deduct certain expenses based on IRS National and Local Standards, along with some actual costs.
Allowed deductions often include:
- Food, clothing, and other essentials (IRS National Standards)
- Housing and utilities (IRS Local Standards for New Jersey)
- Transportation costs, including vehicle operation and public transit
- Taxes and mandatory payroll deductions
- Health insurance and reasonable healthcare expenses
- Childcare, child support, and alimony (as applicable)
- Certain education expenses for a special needs child
- Secured debt payments like mortgage or car loan installments
After these deductions, the test determines whether you have enough disposable income to repay a meaningful portion of your unsecured debts over five years. If not, you may still qualify for Chapter 7.
How the Means Test Affects Your Bankruptcy Options: A Quick Roadmap
The results of the NJ bankruptcy means test help determine which chapter you can file and how your case will proceed. Whether you pass or not, you still have a path to relief. Our job is to ensure you understand the implications of each option for your budget, property, and long-term goals.
If you pass the means test, you are typically eligible to file Chapter 7. Chapter 7 is often the fastest way to discharge unsecured debts, such as credit cards and medical bills. Most cases are resolved within a few months. You do not make long-term payments to creditors, many people keep their exempt property, and then receive a discharge of the remaining unsecured debts.
On the other hand, not passing the means test does not shut the door to bankruptcy. Instead, it points you toward Chapter 13, a court-approved repayment plan that lasts three to five years. In Chapter 13, your plan payment is built around your disposable income.
Key points for Chapter 13:
- If your income is below the median, your plan may be three years; if above, it is typically five years.
- The means test helps set your monthly disposable income, which affects how much you pay unsecured creditors.
- Chapter 13 can be a powerful tool to stop foreclosure, catch up on mortgage arrears, and manage car loans.
Exceptional circumstances can change the analysis. Even if the means test doesn’t favor Chapter 7, we look for exceptional circumstances that may apply, such as:
- Substantial, documented medical expenses
- Recent job loss or reduced work hours
- Necessary care costs for a dependent or family member
- Military service exceptions and disabled veteran exemptions
- Debts that are primarily business-related instead of consumer
When we present exceptional circumstances clearly and with proper documentation, the test can better reflect your real-life situation. That can make the difference between a Chapter 7 and Chapter 13 filing.
Finally, even when you pass the bankruptcy means test, Chapter 13 might be a stronger choice in some cases—especially if you want to protect nonexempt assets, repay mortgage arrears over time, or manage certain tax debts. The goal is not only to file, but to file under the chapter that sets you up for long-term stability. We can explain the tradeoffs and build a plan that aligns with your priorities.
Take Charge of Your Financial Future with Help from the Law Offices of Wenarsky and Goldstein, LLC
You do not have to face the bankruptcy means test alone. At the Law Offices of Wenarsky and Goldstein, LLC, we combine compassionate guidance with a straightforward, step-by-step process. We take the time to understand your goals, explain what the test means for you, and help you decide between Chapter 7 and Chapter 13 with confidence.
When you work with us, you can expect a thorough review of your income, expenses, and debts, along with accurate calculations for the bankruptcy means test, utilizing the proper standards and documentation. Additionally, we’re prepared to provide clear, straightforward explanations in plain English and a customized strategy that prioritizes your family, property, and future. Finally, expect respect, responsiveness, and a judgment-free environment in which to ask us questions.
If you are ready to find out where you stand, we invite you to schedule an initial consultation. We can review your financial situation, walk you through the means test, and outline your options. We are here to help you on your journey toward relief, stability, and a fresh start.
Call the Law Office of Wenarsky & Goldstein
At the Law Offices of Wenarsky & Goldstein, LLC, our New York and New Jersey attorneys are experienced and knowledgeable in bankruptcy, estate planning and probate, guardianship, special needs planning, and real estate law. To learn more about how we can assist you with your legal needs, call us today at 973-453-2838.
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