The Short Answer
The means test uses a specific definition of "income" that captures almost everything coming into your household — wages, self-employment earnings, rental income, pension payments, child support, alimony, unemployment, and even 401(k) or IRA withdrawals. The main exception is income derived from the federal Social Security Act, which is excluded. To calculate your means test income, North Carolina looks at your average monthly income over the past six months. If your total household income falls below the NC median for your household size, you generally qualify for Chapter 7 without further scrutiny.
Wait a second…I have to qualify to file bankruptcy? Isn’t it enough that I just simply cannot pay my bills? How do I determine whether or not I would qualify? The answer is simple enough: the Means Test. What is the Means Test you might ask? The Means Test is a formula used to determine your ability to pay back all of your debts. This will help determine whether or not you qualify for a Chapter 7 bankruptcy or if you will need to pay back some of your debts and file a Chapter 13 bankruptcy. The Means Test will take in consideration all of the income coming into the home, as well as some of the expenses that are coming out.
What is considered income for the purpose of the Means Test? Here are the most common types of income that factor into the Means Test:
Types of Means Test Income
| W2 Wages/Tips | Self Employment Income (this also includes babysitting income) |
| Family Support | Alimony |
| Income from Rental Properties | Child Support |
| 401k / IRA / Life Insurance Withdrawals | Trust Accounts |
| Unemployment | Pensions |
Almost all income is considered for the purposes of the Means Test. However, there is a small number of sources of income, generally those that derive from the federal Social Security Act, that are not considered for Means Test purposes.
The Means Test regularly changes requirements for each state, currently, North Carolina is as follows:
| Household Size: | Median Income for Means Test: |
| 1 | $37,781 |
| 2 | $50,630 |
| 3 | $55,468 |
| 4 | $67,578 |
Make too much? Before you get discouraged, there are “qualified” deductions that help bring down that means. Some qualified deductions are: taxes, medical insurance, life insurance premiums, mandatory deductions from you pay, charitable contributions, court ordered payments, and out of pocket co-pays and prescriptions.
You will need to sit down with your bankruptcy attorney and let them run a complete Means Test on you to determine whether or not you qualify at this time. Looking at the past six months of pay stubs or a profit and loss will help an attorney determine whether or not you are able to pass the Means Test.
Key Takeaways
- Nearly all household income counts toward the means test — including self-employment, rental income, child support, alimony, pensions, and retirement account withdrawals.
- Social Security income is the most significant exclusion and is not counted toward your means test total.
- The means test uses a six-month backward look at your income, so timing your filing can sometimes make a meaningful difference in whether you qualify.
- North Carolina median income thresholds currently range from $37,781 for a single-person household to $67,578 for a household of four — if you're below these figures, you likely pass automatically.
- Earning above the median doesn't disqualify you — allowable deductions like taxes, medical insurance, and court-ordered payments can bring your calculated income below the threshold.
- A bankruptcy attorney needs to run a full means test using your actual pay stubs or a profit and loss statement before you can know for certain which chapter you qualify for.
Attorney Insight
The mistake I see most often is people assuming that because they feel broke, they'll automatically pass the means test — then they come in and we discover a spouse's income, a pension, or regular rental deposits they didn't think to mention. All of that counts, and adding it up can push a household over the NC median threshold. On the flip side, clients who are over the median sometimes give up too soon — after we apply deductions for taxes, insurance, and other allowed expenses, many of them qualify for Chapter 7 anyway. Running the full means test with real numbers is the only way to know where you actually stand.
