Chapter 7 bankruptcy allows Tennessee residents to eliminate unsecured debts, such as credit card balances and medical bills. However, not everyone qualifies for this type of bankruptcy. The means test determines whether an individual can file for Chapter 7 or if they must consider Chapter 13.
How the means test works
The means test consists of two steps. The first step compares a person’s household income to Tennessee’s median income for their family size. If one’s income falls below this threshold, the person qualifies for Chapter 7 without further analysis. If the household’s income exceeds the median, they must proceed to the second step, which assesses allowable expenses, such as housing, utilities, and childcare, to determine disposable income.
Disposable income refers to the money remaining after covering essential living expenses. If an individual has significant disposable income, they may have to file for Chapter 13, which involves repaying a portion of their debts over time. If their disposable income is minimal, they can proceed with Chapter 7.
Tennessee median income and expense considerations
The income threshold for the means test is adjusted periodically. As of 2025, the median income for Tennessee residents:
- Household of 1 person: $60,176
- Household of 2 people: $76,008
- Household of 3 people: $90,131
- Household of 4 people: $106,705
The limit increases by $9,900 for each additional individual in a household above 4 people.
What happens after completing the means test
Individuals who pass the means test can proceed with Chapter 7 bankruptcy. The process typically takes a few months and discharges most unsecured debts. Those who do not pass may still pursue Chapter 13, which involves making structured payments over three to five years.
The means test ensures that Chapter 7 remains available to those who truly cannot afford to repay their debts. Understanding income limits and allowable expenses can help Tennessee residents determine their eligibility before beginning the bankruptcy process.
