Texas Chapter 7 Bankruptcy: Income Limits and Means Test

To qualify for Chapter 7 bankruptcy in Texas, your household income must fall at or below the state median for your household size, or you must pass a more detailed means test that examines your expenses. For cases filed between November 1, 2025, and March 31, 2026, the median cutoff runs from $65,123 for a single earner to $114,938 for a household of four. Earning above these amounts does not disqualify you; it just means more paperwork.

Texas Median Income Cutoffs for Chapter 7

The U.S. Department of Justice publishes state median income figures several times a year using Census Bureau data. For Chapter 7 cases filed in Texas between November 1, 2025, and March 31, 2026, the annual thresholds are:

1 earner: $65,123
2 people: $84,491
3 people: $96,728
4 people: $114,938

For households larger than four, add $11,100 per additional person.¹ The numbers change periodically, so anyone filing after March 31, 2026, should check the DOJ’s means testing page for the current figures.

If your income sits at or below the applicable line, the law says no presumption of abuse exists and you skip the detailed expense analysis entirely.² Most below-median filers move straight to preparing their petition.

How Income Is Actually Counted

The income figure compared against the Texas median is not your most recent paycheck. Federal law defines “current monthly income” as the average of all gross income you received during the six full calendar months before your filing date, multiplied by twelve.³ That window matters. If you held a high-paying job for four of those months and then lost it, those earnings still count in full. Waiting a month or two to file can dramatically change your averaged income.

Almost everything counts: wages, self-employment income, rental income, interest, dividends, and regular contributions others make toward your household expenses. If a parent pays your electric bill every month or a partner covers groceries, that money gets included.

What Doesn’t Count

Social Security is the biggest exclusion. No matter how much you receive in retirement or disability payments from Social Security, none of it enters the calculation.³ For retirees living primarily on Social Security, this exclusion alone often drops countable income below the Texas median.

Certain veterans’ benefits are excluded as well. The HAVEN Act keeps VA disability compensation, combat-related injury payments, and similar military disability pay out of the income calculation.⁴ Payments to victims of war crimes and terrorism are also excluded.

If You’re Married and Filing Alone

Your non-filing spouse’s income still gets added to your household total for the means test. This trips up filers who assume that filing individually means only their own earnings matter. You can offset the added income with a marital adjustment deduction covering expenses your spouse pays independently, such as their own credit card bills or child support from a prior relationship. Documentation like account statements is needed to support those deductions.

How Household Size Is Counted in Texas

The number you use for household size directly controls which median figure you’re measured against. A single person earning $70,000 fails the below-median test as a one-earner household ($65,123) but passes easily inside a three-person household ($96,728). Getting the count right is not always straightforward.

The most common approach in Texas courts is the “heads on beds” method, which counts everyone physically living in your home.⁵ An elderly parent sleeping in your spare room counts. A college student who has moved out does not, even if you still pay their tuition.

Some Texas courts instead use an “economic unit” approach that focuses on financial interdependence. Under this method, a child living at college might still count if you pay all their bills, while a roommate who splits rent but is otherwise financially independent might not.⁵ Because there is no single federal definition of household, the answer can depend on which Texas bankruptcy division handles your case.

If You’re Above the Median: The Means Test

Earning more than the Texas median doesn’t slam the door on Chapter 7. It opens a second stage where you subtract allowable expenses from your income to see whether you actually have money left over to pay creditors. Plenty of above-median earners pass, especially those with high housing costs, large families, or significant mortgage and car payments.

Standardized Expense Deductions

The means test doesn’t simply accept whatever you claim to spend. It uses IRS National and Local Standards to cap basic living expenses.⁶ National Standards cover food, clothing, and personal care at the same dollar amount everywhere. Local Standards cover housing, utilities, and transportation, and they vary by county. A filer in Harris County gets a different housing allowance than one in Lubbock County.

On top of the standardized figures, you can deduct actual costs for payroll taxes, health insurance premiums, childcare, and court-ordered obligations like child support. These use your real numbers rather than IRS averages.

Secured Debt Payments

Mortgage and car loan payments get their own deduction. Add up all payments contractually due on each secured debt over the 60 months following your filing date, then divide by 60 for the average monthly figure.⁷ This deduction is separate from the IRS housing standard, so if your average mortgage payment exceeds the Local Standard for your county, the excess still reduces your disposable income. For many Texas homeowners, the mortgage deduction alone pushes disposable income low enough to qualify.

The Abuse Thresholds

After subtracting permitted expenses, the remaining figure is multiplied by 60 to project your disposable income over five years. Whether that number triggers a presumption of abuse depends on a two-tier test:

Below $10,275: no presumption of abuse. You pass.
Between $10,275 and $17,150: abuse is presumed only if the amount also exceeds 25% of your total nonpriority unsecured debt.
$17,150 or above: abuse is presumed regardless of your debt level.

These figures were last adjusted effective April 1, 2025, and are periodically updated for inflation.² Confirm the current amounts before filing.

Rebutting a Presumption of Abuse

Even if your numbers trigger the presumption, you can overcome it by showing “special circumstances” that justify higher expenses or lower income with no reasonable alternative. The statute specifically names a serious medical condition and a call to active duty as examples.² Job loss, divorce-related expenses, and caring for a disabled family member have also been accepted in various cases. Detailed documentation and an itemized explanation are required.

Qualifying Is Only the Income Question

Passing the income limits or means test gets you into Chapter 7, but it doesn’t decide what property you keep or which debts get wiped out. Texas has generous property exemptions (including an unlimited-value homestead within acreage limits), and federal law lists specific debts that survive discharge, such as child support, most student loans, recent income taxes, and debts from fraud or drunk driving. Those questions are separate from whether your income qualifies you to file in the first place.

1
United States Department of Justice. November 1, 2025 Median Income Table
2
Office of the Law Revision Counsel. 11 USC 707 – Dismissal of a Case or Conversion to a Case Under Chapter 11 or 13
3
Office of the Law Revision Counsel. 11 USC 101 – Definitions
4
Congressional Research Service. Veterans Benefits and Bankruptcy
5
United States Bankruptcy Court Northern District of Texas. Memorandum Opinion and Order Regarding Household Size Determination
6
United States Department of Justice. Means Testing – IRS Data
7
United States Courts. Chapter 7 Means Test Calculation