Hawaiʻi Chapter 7 Means Test: Do You Qualify for Bankruptcy?
This guide is legal information, not legal advice, and reading it does not create an attorney-client relationship. Every situation is different, and the right move in your case depends on your facts. For advice about your own situation, start with my free questionnaire or call me at (808) 468-7000.
I work hard to keep this page accurate, but errors or omissions are possible and the law can change. The information here is current only as of the date above.
Do I pass the Hawaiʻi Chapter 7 means test?
If your household income is at or below the Hawaiʻi median for your household size, you pass the means test and no second calculation is needed. If you are above the median, a second calculation of your allowed expenses decides it, and many people above the median still qualify. Some filers skip the test entirely, because it applies only when your debts are primarily consumer debts.
The means test stops more people from filing than any other part of Chapter 7, and it is the part I spend the most time correcting. I meet people who assumed for years that they earned too much to file, when a short review would have shown they qualified. This guide explains how the test really works, in the order the court applies it. The current Hawaiʻi median income figures live in one place, the tables in my Chapter 7 guide, so they stay up to date.
What the Means Test Actually Is
The means test is a formula Congress added to the Bankruptcy Code to steer higher-income filers away from Chapter 7. It starts with your "current monthly income," which is not this month's paycheck: it is the average of nearly everything you received in the six full calendar months before the month you file (with a few exclusions covered below), multiplied by twelve.
That yearly figure is compared to the median income for a Hawaiʻi household of your size, published by the U.S. Trustee Program and updated during the year. Median means the midpoint rather than the average. The number comes from Census income data for Hawaiʻi families of that size, so half earn more and half earn less. If you are in the lower half, you pass step one.
Step One: At or Below the Median, You Pass
If your number is at or below the Hawaiʻi median for your household size, the means test is over. You pass, and no further calculation is required. A large share of my Chapter 7 clients finish the means test right here. The means test is not the only question a Chapter 7 has to answer, though, because the court can still look at the overall picture of your finances.
Step Two: Above the Median Is Not a No
If your income is above the median, the test moves to a second calculation, and that calculation is where above-median filers often qualify. The second step subtracts your allowed expenses, using IRS standards for housing, transportation, and living costs, along with your actual payments on secured debts like a mortgage and car loan, plus items such as taxes, health insurance, and court-ordered support. What remains, your disposable income, determines whether Chapter 7 is presumed unavailable.
The Hawaiʻi advantage. Part of the formula is set locally. The housing and utility allowances are set county by county, so the Hawaiʻi figures reflect Hawaiʻi costs, and your actual mortgage and car payments come off the top. Other allowances, such as food, clothing, and personal care, are set at one national level no matter where you live. A salary that would fail the second step on the mainland can pass it here, because the part of your cost of living the formula recognizes is a Hawaiʻi number.
Income That Does Not Count
The Bankruptcy Code excludes benefits received under the Social Security Act from the means test calculation. Social Security retirement and disability benefits do not count against you. The same is true of VA disability compensation and certain other military disability-related payments, which Congress excluded in 2019. For retirees, disabled filers, and disabled veterans whose income comes mainly from these benefits, the means test is usually not an obstacle at all.
The Business Debt Exception
The means test applies only when your debts are primarily consumer debts. If more than half of your total debt comes from a business, such as business loans, a commercial lease, guarantees you signed for the company, or business taxes, the means test does not apply to your case, whatever your income. I see this most often with people who closed a business and are still carrying its debts personally. A narrower set of exceptions also protects certain disabled veterans and reservists called to active duty.
Timing Can Decide the Result
Because the test averages your last six full months of income, the filing date is part of the strategy. If you were laid off two months ago, your six-month average still carries four months of your old paycheck, and it falls with every month that passes. If a bonus or a stretch of overtime just landed, the same logic runs the other way. Part of my job is choosing the month to file, and I have seen a few weeks' patience turn a failing number into a passing one.
If You Do Not Pass
Failing the means test closes one door, not all of them. Chapter 13 is available at any income, as long as your debts are inside its limits, and for many above-median filers it is the better tool anyway, especially when a home, a car, or recent taxes are part of the picture. In limited situations, documented special circumstances can rebut the means test result itself. If you are weighing the two chapters, my guide to choosing between Chapter 7 and Chapter 13 walks through the decision the way I do on a first call.
The Same Math Shows Up in Chapter 13
The means test is not only a Chapter 7 gate. The same income calculation does two jobs in Chapter 13: it helps set how long your plan must run (three years if you are below the median, five if you are above), and for above-median filers it uses the same allowed-expense standards to calculate your disposable income, the number that sets the minimum your unsecured creditors must receive through the plan. So the math matters even when Chapter 13 is your path; it just changes what it is deciding. My Chapter 13 guide explains how a plan payment is built.
Let's talk about your options.
I have helped more than a thousand people through this. Tell me what you are dealing with and I will tell you what you may qualify for: Chapter 7, Chapter 13, or another path entirely.
Frequently Asked Questions
Is there a maximum income for Chapter 7 in Hawaiʻi?
No. There is no fixed income cap. The means test is a two-step formula, not a ceiling. Being above the Hawaiʻi median income makes the second step necessary. It does not make Chapter 7 impossible, because your allowed expenses decide the result. And if your debts are primarily business debts, the means test does not apply to your case at all.
Does Social Security count toward the means test?
No. Benefits received under the Social Security Act, including retirement and disability benefits, are excluded from the means test income calculation by the Bankruptcy Code's definition of current monthly income. Many people living mainly on Social Security pass the means test easily for exactly this reason.
Does my spouse's income count if they are not filing?
Partly, and the order matters. At the first step, the comparison to the Hawaiʻi median, your spouse's income is counted with yours even if none of it reaches your bills, which can put you above the median on paper. What your spouse spends on their own separate obligations is backed out at the second step, not the first. So a non-filing spouse can push you into the longer calculation without costing you the result. Bring your household numbers and I will run it properly.
What happens if I fail the means test?
You still have good options. Chapter 13 is available at any income level, as long as your debts are inside its limits, and for many people it is the better tool anyway, especially when a home or recent taxes are involved. Timing can also matter: the test averages your last six full months of income, so if your income recently dropped, waiting a month or two can change the math. And in limited situations, documented special circumstances can rebut the result. Failing the means test ends one path, not the case for relief.
Do business debts really skip the means test?
Yes. The means test applies only when your debts are primarily consumer debts. If more than half of your total debt comes from a business you ran, such as business loans, commercial leases, or business taxes, the means test does not apply, although the court can still review any filing for good faith. If you closed a business and are carrying its debts, tell me at the start, because it may simplify your path to Chapter 7.
Does the means test matter in Chapter 13?
Yes, but differently. In Chapter 13 it is not a pass-fail test. The same income calculation helps set how long your plan runs, three years below the Hawaiʻi median and five years above it, and for above-median filers it calculates the disposable income that sets the minimum unsecured creditors must receive through the plan.
Sources & Legal Authorities
The authorities behind this guide.
- United States Code. 11 U.S.C. § 101(10A); § 109(e); § 707(b); § 707(b)(2)(A)(iii); § 707(b)(2)(B); § 707(b)(2)(D); § 707(b)(3); § 707(b)(6); § 707(b)(7); § 1325(b); § 1325(b)(4)
- Other. U.S. Trustee Program median family income table for Hawaii; IRS Collection Financial Standards; Official Forms 122A-1 and 122A-2
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