A common—and costly—bankruptcy misconception is that earning more than New Jersey’s median household income automatically makes someone ineligible for Chapter 7.
It does not.
Income is an important part of Chapter 7 eligibility, but the median-income comparison is only the first stage of the analysis. For many people whose income is above the applicable New Jersey median, the next step is a more detailed means-test calculation that accounts for permitted expenses and certain debt payments. Depending on the household’s actual circumstances, an above-median debtor may still qualify for Chapter 7.
That distinction matters in New Jersey, where a solid salary does not necessarily mean a household has meaningful disposable income. Mortgage payments, taxes, childcare, support obligations, insurance, transportation costs and other necessary expenses can consume a substantial portion of monthly income.
Before assuming Chapter 13 is the only option, it is worth having an experienced bankruptcy attorney analyze the complete financial picture.
What Does “Above the Median” Mean in Chapter 7 Bankruptcy?
Individuals filing Chapter 7 generally complete Official Form 122A-1, the Chapter 7 Statement of Current Monthly Income. The form compares the debtor’s calculated current monthly income with the median income for a New Jersey household of the same size.
The U.S. Trustee Program periodically updates these median-income figures. For cases filed on or after April 1, 2026, the applicable New Jersey figures are:
- One person: $87,173
- Two people: $106,876
- Three people: $137,136
- Four people: $168,127
- For households larger than four: add $11,100 for each additional person
These figures change periodically, so a person should not rely on an old article, an online calculator using last year’s numbers, or a friend’s prior bankruptcy case.
If calculated income is below the applicable median, the debtor generally does not need to complete the second stage of the means test and no presumption of abuse arises from that calculation.
If income is above the median, however, the analysis continues. That is the part many people miss.
Above-Median Income Does Not Automatically Mean Chapter 13
An above-median debtor generally completes Official Form 122A-2, commonly called the Chapter 7 Means Test Calculation. The purpose is to determine whether, after permitted deductions, the debtor has enough disposable income to create a presumption that granting Chapter 7 relief would be abusive.
This is not simply a household budget where every dollar actually spent is automatically deducted. Bankruptcy law uses a combination of standardized allowances and certain actual expenses and debt payments.
The U.S. Courts’ instructions for the official Chapter 7 forms explain that the means test reduces income by allowed living expenses and payments on certain debts. If the resulting amount is high enough, a presumption of abuse can arise. Even then, the official instructions recognize that special circumstances may sometimes rebut that presumption.
In practical terms, the question is not merely, “How much do you earn?” It is, “What does the bankruptcy means test say after the complete calculation is performed?”
Why the Six-Month Income Calculation Can Be Misleading
Bankruptcy uses a specific definition of “current monthly income.” It generally looks backward at income received during the six full calendar months before filing and converts that figure into a monthly average.
That can create results that do not perfectly match what someone earns today.
Consider an employee who received substantial overtime for several months but whose overtime has now ended. Or someone who recently changed jobs and took a pay cut. A commission-based employee may have had an unusually strong quarter. A household may also have experienced a bonus that makes the six-month average look higher than ordinary monthly income.
The timing of a bankruptcy filing can therefore matter. That does not mean manipulating income or delaying a necessary filing solely to obtain a preferred result. It means an attorney should understand whether the historical six-month period accurately reflects the debtor’s present financial reality and how the Bankruptcy Code treats the income involved.
Which Expenses Can Matter on the Means Test?
For an above-median debtor, allowable deductions can make the difference between qualifying for Chapter 7 and needing to consider Chapter 13.
The means test incorporates expense categories that can include food and household expenses, housing and utilities, transportation, taxes, health insurance, certain healthcare costs and other permitted deductions. Some amounts are based on IRS national or local standards, while other deductions depend on the debtor’s actual qualifying obligations.
Secured debt can also matter. Mortgage and vehicle obligations, for example, may affect the calculation under the applicable rules. Domestic support obligations and certain other required payments can be significant as well.
This is one reason two New Jersey households earning the same salary can receive very different Chapter 7 analyses. A married couple with children, a mortgage, childcare expenses and support obligations is not financially situated the same way as a two-person household with the same gross income and substantially fewer allowable expenses.
A Higher Salary Can Still Be Consistent With Chapter 7
Goldsmith Cohen regularly evaluates bankruptcy options for people with stable employment and professional careers. Having a good job does not itself prevent someone from filing Chapter 7.
A household may earn a strong gross income while carrying credit-card balances, personal loans, medical bills, judgments or old business obligations that have become impossible to service. High housing costs and ordinary family expenses can further compress the amount actually available each month.
The firm’s Chapter 13 FAQ gives a useful example of why assumptions based on salary alone can be wrong: a debtor earning a substantial salary may still have deductions such as alimony, child support and education-related obligations that materially change the eligibility analysis.
The correct approach is to run the numbers before deciding which chapter fits. A New Jersey bankruptcy attorney should evaluate income, household size, expenses, secured debt, assets and the type of debt involved—not simply look at annual salary and declare Chapter 7 unavailable.
Passing the Means Test Is Not the Only Chapter 7 Issue
Qualifying under the means test is important, but it is not the entire Chapter 7 analysis.
Chapter 7 involves a trustee reviewing the debtor’s assets, liabilities, income, expenses and financial history. Property and exemption planning can be just as important as income qualification.
A person might pass the means test but own an asset with significant nonexempt value. Depending on the circumstances, Chapter 13 could be the safer option because it can allow a debtor to retain property while satisfying the requirements of a repayment plan.
The reverse can also happen. Someone may assume that owning a home, maintaining a retirement account, driving a financed vehicle or earning a professional salary makes Chapter 7 impossible when those facts do not actually prevent a properly structured Chapter 7 case.
Goldsmith Cohen’s Chapter 7 bankruptcy page explains the broader process and the importance of evaluating what the debtor wants to keep before filing.
What If the Means Test Points Away From Chapter 7?
If the analysis shows that Chapter 7 is not appropriate, that does not mean bankruptcy cannot help.
Chapter 13 allows an individual with regular income to reorganize debt through a court-supervised plan, generally lasting three to five years. It can also offer advantages that Chapter 7 does not, including a structure for curing mortgage arrears, protecting certain assets, addressing some tax obligations and stopping foreclosure while the debtor works through the plan.
The monthly payment is not simply a fixed percentage of total debt. Income, reasonable expenses, secured and priority claims, property values and other requirements all influence the plan. Goldsmith Cohen’s guide to how Chapter 13 payments are calculated in New Jersey explains that analysis in more detail.
The goal should not be to force every case into Chapter 7. It should be to determine which bankruptcy chapter produces the best lawful result for the client’s actual circumstances.
Documents That Help Determine Chapter 7 Eligibility
A meaningful Chapter 7 analysis requires accurate information. Before a consultation, it is useful to gather recent pay stubs or other income records, recent tax returns, mortgage and vehicle statements, information about childcare or support obligations, insurance expenses, debt statements and a realistic household budget.
Irregular income should be identified as well. Bonuses, commissions, overtime, business income and other payments can affect the six-month calculation.
The firm’s bankruptcy consultation checklist provides a useful starting point for gathering the documents needed to evaluate a potential case.
Do Not Rule Yourself Out Based on an Online Income Limit
The means test is designed to screen Chapter 7 cases, but it is more nuanced than comparing annual salary with a single number on a website.
For cases filed on or after April 1, 2026, New Jersey’s median-income figures provide the first benchmark. They are not an automatic ceiling on Chapter 7 eligibility.
Someone who is above the median may still qualify after the complete means-test calculation. Someone who qualifies under the income analysis may still need to consider property, exemptions and other case-specific issues before filing. And for someone who truly does not qualify for Chapter 7, Chapter 13 may provide a very effective alternative.
Jonathan Goldsmith Cohen represents individuals and families throughout New Jersey and focuses exclusively on bankruptcy, foreclosure, loan modification and related creditor matters. If income has caused you to assume that Chapter 7 is unavailable, Goldsmith Cohen can review the actual numbers and explain which options make sense before you commit to a course of action.
Frequently Asked Questions About Above-Median Chapter 7 Cases
Does earning more than $100,000 automatically disqualify me from Chapter 7 in New Jersey?
No. Chapter 7 eligibility depends on household size, the applicable median-income figure, the means-test calculation and other case-specific factors. A six-figure income does not automatically require Chapter 13.
Does the means test use my current paycheck?
Not exactly. Current monthly income for means-test purposes generally uses income received during the six full calendar months before filing. Recent changes in employment, overtime, commissions or bonuses can therefore matter.
If I pass the means test, am I guaranteed to get Chapter 7?
No. The means test is one part of the analysis. Assets, exemptions, financial history, the nature of the debts and other Bankruptcy Code requirements also need to be reviewed.
What happens if I do not qualify for Chapter 7?
Chapter 13 may allow you to reorganize debt through a three-to-five-year plan while protecting assets and receiving the benefit of the automatic stay. The appropriate chapter depends on the complete financial picture.