The Chapter 7 Bankruptcy Means Test in Colorado: How It Works
To qualify for Chapter 7 bankruptcy, you must show you lack the disposable income to repay your debt. The Chapter 7 means test will decide whether you meet this eligibility limit based on how your income compares to the state’s median for your household size. If your income is at or below the median, you pass. Come out above, and a second calculation applies. I’ll review that and more in this article, from the latest Colorado numbers to a step-by-step example and why the filing month matters.
Key Takeaways: Chapter 7 Bankruptcy Means Test
The bankruptcy means test applies to individuals whose debts are mostly consumer rather than business debts.
The Chapter 7 means test calculation adds up your income during the six months before you file, divides the total by six, then multiplies it by 12 to get your annualized Current Monthly Income (CMI). Your CMI is compared to Colorado’s median family income.
The six-month income window moves with your filing date, so a bonus, severance, or overtime can make your income look higher than it is.
If your current monthly income is at or below the median, you pass. If your CMI is above it, a second calculation determines whether the filing is presumptively abusive, meaning you could afford to repay a meaningful share of your debts over five years.
Social Security benefits and certain VA and military disability benefits don’t count toward the means test.
Qualifying disabled veterans and reservists have a separate exemption.
Passing the Chapter 7 means test is not the same as qualifying. Schedules I and J still apply.
How Income is Calculated for Chapter 7 Bankruptcy
The Chapter 7 means test uses your “annualized monthly income”—your average monthly income calculated for the year. That figure comes from the amount of money you earned during the six months before your case begins, called the income lookback period. You’ll include all of your countable gross wages—the amount before taxes and payroll deductions. If you have rental or business income, you’ll count your net.
What Counts as Income—and What Doesn’t
It is probably easier to tell you what doesn’t count as income for the Chapter 7 means test because the list is shorter. The Bankruptcy Code excludes Social Security income, VA disability payments, and certain victim compensation from countable income. You may omit unemployment compensation if you contend it was a benefit under the Social Security Act. Countable income extends beyond just your paycheck.
Counts toward the means test | Doesn’t count |
- Gross wages - Alimony - Child support - Gross net rental income - Gross net business income - Pension and retirement income - Workers’ compensation - Short- and long-term disability - Interest, dividends, royalties - Unemployment compensation | - Social Security income - Certain payments received as a victim of war crimes, crimes against humanity, terrorism - VA disability compensation |
OK, grab your calculator so you can tally a rough income estimate after we work through the following hypothetical Chapter 7 means test. In this scenario, a couple with one child (a household of three) plans to file in December.
Income Lookback Period for a December Filing: June 1 through November 30
Total Monthly Income Over Six Months: $63,000
Gross Wages: $45,000 Alimony: $12,000 Child Support: $6,000
$45,000 + $12,000 + $6,000 = $63,000
Average Monthly Income: $10,500/month
$63,000 ÷ 6 = $10,500
Annualized Current Monthly Income: $126,000
$10,500 x 12 = $126,000
Once the current monthly income is determined, it’s compared against Colorado’s median family income.
The three-person household in our scenario would pass the means test because its $126,000 income is below the median family income for a household of the same size.
Colorado’s Chapter 7 Income Limits
Household size | Median family income |
One earner | $87,940 |
Two people | $109,497 |
Three people | $130,850 |
Four people | $153,501 |
Each additional person | + $11,100 |
*Note: These figures apply to cases filed on or after April 1, 2026. The U.S. Trustee Program publishes the table used for Form 122A-1.
Colorado’s single-earner threshold is one of the highest in the country: $87,940, behind only Washington ($88,585) and Massachusetts ($88,202). The U.S. Census Bureau updates the median incomes each year.
Why the Month You File Bankruptcy Matters
Because the lookback covers the six calendar months before you file, the window shifts each time the calendar turns. A bonus, severance payment, or stretch of overtime within that window is included, even if it doesn’t reflect what you earn now. That can push a household over the median on paper. If your lookback includes unusual income, talk with an attorney before you select a filing date.
What If You’re Above the Median?
If your income exceeds the median, you have an opportunity to complete a second calculation using Form 122A-2. Essentially, this calculation tries to determine whether you’re abusing Chapter 7 bankruptcy relief. Since Chapter 7 primarily deals with consumer debt (e.g., cars, houses, furniture, etc.), the government wants to make sure you aren’t trying to avoid your obligation to pay.
This second calculation allows you to subtract legally allowable expenses, along with secured and priority debt payments, from your current monthly income. The remainder is multiplied by 60, or five years’ worth of that remaining monthly amount.
For bankruptcy cases filed on or after April 1, 2025, whether a presumption of abuse applies depends on your five-year disposable income figure:
Under $10,275: No presumption of abuse.
$17,150 or more: Abuse is automatically presumed.
Between $10,275 and $17,150: Abuse is presumed only if that 5-year total covers at least 25% of your nonpriority unsecured debt.
11 U.S.C. 707(b)(2)(A)(i) Those figures reflect the automatic three-year adjustments issued under 11 U.S.C. 104.
Disputing the Presumption of Abuse
You may rebut the presumption by demonstrating special circumstances, such as a serious medical condition or active duty in the Armed Forces. These circumstances must justify additional expenses or adjustments to your current monthly income and apply only if no reasonable alternative exists. You must itemize and document each additional expense or income adjustment and provide a sworn statement in support.
If you don’t rebut the presumption of abuse, the court may dismiss your case or, with your consent, convert it to Chapter 11 or Chapter 13. Under federal law, the U.S. trustee must review your filing and, within 10 days after the first meeting of creditors, file a statement on whether your case is presumed abusive.
Passing Is Not the Same as Qualifying
Schedule I and Schedule J (your income and expenses) are forms that must also be filed, as they give the court a sense of your current monthly budget. Even if you pass the means test, a motion to dismiss or convert can still be brought if your actual discretionary income is substantial. If your income is at or below the Colorado median, only the judge or the U.S. trustee can bring that motion. If you’re above the median, the case trustee or a creditor can bring that motion as well.
Is Anyone Excused From Passing the Means Test?
Yes, there are limited groups of individuals who may not have to pass the Chapter 7 means test.
Some Military Members
Veterans and service members may qualify for an exemption from means testing under 11 U.S.C. 707(b)(2)(D), separate from the income rules above. If the exemption applies, the presumption for abuse rules doesn’t apply, and the court can’t dismiss or convert the case based on any form of means testing.
Under federal law, a disabled veteran may qualify for an exemption from the means test abuse provisions if the debtor’s indebtedness was incurred primarily during a period of active duty or qualifying homeland defense activity. Veterans also qualify if they were discharged or released due to a disability that happened or got worse while on duty. Additionally, the debt must have been incurred primarily during active duty or homeland defense activity.
Reservists and National Guard members may qualify if, after September 11, 2001, they were called to active duty or homeland defense activity while a member of the Reserves or National Guard for a period of at least 90 days. The exclusion runs while they are on active duty or performing homeland defense activity, plus 540 days afterward. This provision applies only to cases filed before December 19, 2027, unless Congress extends it again. Form 122A-1Supp is used to claim those exemptions.
Like Social Security, the means test excludes VA disability compensation from current monthly income.
Non-Consumer Debt Holders Fall Outside Chapter 7’s Means Test
If most of what a debtor owes is business or other non-consumer debt, they can file a Chapter 7 liquidation without worrying about the means test.
The means test is one way the Bankruptcy Code checks for abuse. Under 11 U.S.C. § 707(b)(1), a bankruptcy court can dismiss a Chapter 7 case filed by someone whose debts are primarily consumer debts if granting relief would be an abuse. With the debtor’s consent, the court can instead convert the case to Chapter 11 or Chapter 13. This can happen when a debtor appears to have enough money coming in to pay creditors, since the rule is designed to steer those filers toward a Chapter 13 repayment plan.
The presumption of abuse in § 707(b)(2) applies only to cases covered by that rule, where debt taken on to make a profit or tied to a business transaction is non-consumer debt.
When to Talk to a Colorado Bankruptcy Attorney
If your income sits near the Colorado median, or the means test isn’t coming out the way you expected, a Colorado bankruptcy attorney who handles these filings regularly can give you legal clarity fast. Legal guidance is most helpful when:
Your current monthly income is close to the median for your household size.
Your six-month lookback includes bonuses, severance, or overtime that overstate your current earnings.
You receive Social Security or VA disability compensation.
You served on active duty or in the Guard or Reserves and may qualify for an exemption.
Your debts may be primarily business rather than consumer debts.
You cleared the means test, but have discretionary income that could draw a challenge.
At Robinson & Henry, our bankruptcy attorneys regularly represent Colorado filers working through Chapter 7 eligibility. We know how the six-month calculation is built, where the presumption of abuse arises, and how to document special circumstances—before an objection or a motion to convert reshapes your case. Call 303-688-0944 or book a consultation online to get started.
No. Section 101(10A) excludes Social Security income from current monthly income.
No. Like with Social Security, VA disability compensation is not included in the current monthly income. Separately, disabled veterans whose debts arose primarily during active duty or homeland defense activity are exempt from the means test under 11 U.S.C. § 707(b)(2)(D).
Yes. Both count toward current monthly income, along with gross wages, net rental and business income, interest, dividends, and royalties, unemployment compensation, pension and retirement income, workers’ compensation, and short- and long-term disability payments. Unemployment compensation can be left out if you contend it is a benefit under the Social Security Act.
You move to the 707(b)(2) calculation, which determines whether the filing is presumptively abusive. Being above the median does not disqualify you by itself.
You can file, but you can’t get another discharge if you already received a Chapter 7 or Chapter 11 discharge in a case filed within the last eight years before your new petition. Section 727(a)(8) counts the eight years from the date you filed your previous case to the date you filed your new one.
You may rebut it by showing special circumstances. Otherwise, the court may dismiss the case or, with your consent, convert it.
The meeting of creditors is usually held 21 to 40 days after filing, and discharge generally follows 60 to 90 days after the date first set for that meeting. Excluding dismissed or converted cases, individual debtors receive a discharge in the vast majority of Chapter 7 cases.