New Means Test Local and National Standards May Help You Qualify for Chapter 7 Bankruptcy

If you are struggling with debt and considering filing for bankruptcy, recent updates to the Means Test standards might make it easier for you to qualify for Chapter 7 bankruptcy or potentially reduce your required payments in a Chapter 13 filing. As of May 15, 2025, the U.S. Department of Justice has issued updated the Local and National Standards used in the Bankruptcy Means Test. The updates are important because they can directly affect your Means Test results and your eligibility for debt relief through bankruptcy. These figures are not based on your actual living expenses, but on standardized amounts provided by the Census Bureau and IRS and are compiled by the Office of the United State Trustee in the Department of Justice.

These standards include the following:

National Standards:

• food, housekeeping supplies, apparel and services, personal care products and services, out-of-pocket health care expenses including medical services, prescription drugs, and medical supplies

Local Standards:

• housing and utilities (by county) and transportation (by region)

What Is the Bankruptcy Means Test?

If a majority of your debt is consumer-based debt and your household income is above the median for your household size, you must undergo a Means Test analysis to determine if you qualify for Chapter 7 bankruptcy. If you “pass” the means test, you may qualify to file for Chapter 7 bankruptcy. Chapter 7 is the most widely used option of bankruptcy for consumers struggling with debt. It can quickly eliminate most debts and help obtain a fresh financial start. However, if you do not qualify, you may still pursue Chapter 13 bankruptcy, which can enable you to pay your debts, and sometimes even just a fraction of it, through a 60-month payment, interest free payment plan that all creditors must recognize.  t

The Means Test compares your income against certain standardized expenses, along with a number of actual expenses, such as secured debt payments, to determine whether you have the ability, at least hypothetically, to repay your debts. Unfortunately, the standardized expenses are not your actual living expenses, but a list of living allowances provided by the United State Trustee. Often these expenses are below what someone actually has in their budget or incurs on a monthly basis. Upon conducting the test, if you have a surplus of disposable income, you may not qualify for Chapter 7 and will be directed to Chapter 13 instead. Additionally, it should be noted that you may pass the Means Test but still have too much disposable income that would require a Chapter 13 filing. While some debtors have expenses that may exceed the standards, others may have lower expenses. For example, a debtor with low or no rent may be required to file a Chapter 13 bankruptcy if they have disposable income in their household budget that could fund a plan.

What’s New in the 2025 Update?

The May 15, 2025 update to the Bankruptcy Means Test Local and National Standards includes revised figures, which are used to calculate allowable living expenses when determining a debtor’s eligibility for Chapter 7 or calculating the required plan payments under Chapter 13.

Under the Local Standards, updates have been made to the categories of Housing and Utilities as well as Transportation. These figures vary by geographic location and are designed to reflect the average costs of living, regardless of what an individual actually spends. The Housing and Utility Standards are broken down by county, while the Transportation Standards are organized by region. For example, in New York, the Northeast Standards are used.

For example, the following are the new and mortgage/rent housing expenses for the counties in New York City and Long Island broken down by household size. As you can see, there is a wide range of housing expense allowances between the counties. Also provided are the prior expense allowances for context.

The National Standards have also been updated, including changes to allowable expenses for Food, Clothing, and Other Items, as well as Out-of-Pocket Health Care Expenses. These standardized amounts are the same nationwide and provide fixed figures that most debtors can claim, even if their actual expenses are different.

For example, here are the new standards for food:

Contrast these with the prior figures below:

The following is the difference between the figures by household size:

Another example is the costs associated with car ownership. This expense is claimed by debtors who own a car and have an ownership expense, such as a loan or lease payment. Please note, the Means Test also provides an operating expense for vehicles, and a debtor is also entitled to an additional operating expense if their car is over six years and has over 75,000 miles. Here are the revised figures for car ownership:

Compare the numbers above with the prior figures:

The following is the difference between the figures:

While many of the new standards above have only increased slightly, cumulatively these new expenses in the Means Test can make the difference between passing and failing. Furthermore, as you can see from the local standards, where you reside can also have an impact in the results of your Means Test. Please note, these figures are also used when calculating a Chapter 13 plan. These new standards may help you keep a bit more income in your pocket, instead of being paid to creditors when filing for Chapter 13 bankruptcy.

Expenses Not Included in the Standards

There are certain household costs that are not included in the standards used in the Means Test. Two key examples are student loan expenses and pet care. Student loans are a real cost that many debtors are required to pay each month. Many student loans have been coming out of deferment or forbearance and are now a real expense that debtors need to address in their household budgets. Additionally, many Americans have pets. In fact, approximately 66% of all households in America have pets to care for. The expense of feeding and caring for a pet are not mentioned anywhere in the standards used in the Means Test.

Why Does This Matter?

Even if you have previously been advised you do not qualify for Chapter 7 bankruptcy because you failed the means test, these new standards might change that. Higher allowable expenses can lower your calculated disposable income. This can potentially help you qualify for Chapter 7 when you were not able to before. For those considering Chapter 13, the updated standards can also help reduce your monthly Chapter 13 plan payments. Since the Means Test helps calculate how much you must pay your creditors each month in a Chapter 13 plan. Higher allowed expenses mean more reasonable, affordable repayment plans.

Chapter 13 Still Offers Valuable Relief

Even if you do not qualify for Chapter 7 bankruptcy, Chapter 13 remains a powerful tool for debt relief. It allows you to:

• Stop foreclosure and catch up on past due mortgage payments,
• Reorganize and reduce unsecured debts,
• Protect your assets from liquidation,
• Get on a structured path toward financial recovery.

Chapter 13 is particularly useful for homeowners who are behind on their mortgage payments, since it stops foreclosure proceedings and gives you time to catch up on past-due mortgage payments, allowing you to retain your home. Chapter 13 also enables you to reorganize and potentially reduce your unsecured debts, such as credit card balances, medical bills, and personal loans. Unlike Chapter 7, it allows for a structured repayment plan, typically lasting up to 60 months, based upon your income and allowable expenses. In some cases, a debtor is only required to pay a percentage of their debt.

Importantly, Chapter 13 can also protect your non-exempt assets, which can be a concern under Chapter 7. For example, it allows a debtor to protect equity in assets that have a value above the applicable bankruptcy exemptions, including but not limited to real estate, vehicles, stocks, money in the bank, interest in a trust or inheritance. This makes Chapter 13 bankruptcy an attractive option for individuals who have valuable property they wish to keep in the bankruptcy process. Overall, Chapter 13 provides a clear, manageable path to regain control of your finances and move toward long-term financial stability with the risk of chapter 7 bankruptcy.

Speak to an Experienced Bankruptcy Attorney – Contact the Law Offices of David I. Pankin, P.C.

Understanding how these updated standards apply to your situation can be complicated. It is important to consult with an experienced bankruptcy attorney who can walk you through your bankruptcy and debt relief options. At the Law Offices of David I. Pankin, P.C., we have helped over 15,000 New Yorkers eliminate their debt and rebuild their financial lives. Contact us today for a free consultation by calling (888) 529-9600 or by using our easy online contact form.