Chapter 7 Income Limits in California: Means Test and Exemptions

Chapter 7 income limits in California work on two levels. If your household income over the six months before filing, annualized, falls below the state median for your household size, you pass automatically. For cases filed on or after April 1, 2026, that means under $79,253 for one person, $102,797 for two, $116,541 for three, and $139,071 for four, with $11,100 added for each additional member.¹ Earn more than that and you can still qualify, but you have to pass the means test by showing your disposable income after allowed deductions is too low to fund a repayment plan.

2026 Median Income by Household Size

The U.S. Trustee Program publishes California’s median income figures using Census Bureau data. For Chapter 7 cases filed on or after April 1, 2026:

1 person: $79,253
2 people: $102,797
3 people: $116,541
4 people: $139,071
Each additional person beyond 4: add $11,100

California’s numbers run higher than the national median, which tracks the state’s cost of living. The court counts everyone in the household who contributes to or draws from shared financial resources when picking the right threshold. If your annualized income lands below the applicable number, you’re through the initial screening without further scrutiny.¹

How Your Income Gets Measured

“Current monthly income” in bankruptcy is not what you earned last month. It’s the average of all income received during the six full calendar months ending on the last day of the month before you file. File in August 2026 and the court looks at February through July 2026.

The six-month average smooths out bonuses, overtime, and seasonal swings. It includes wages, salary, commissions, business profits, rental income, dividends, interest, and money anyone else regularly contributes toward your household expenses. Multiply the monthly average by 12. That annualized figure is what gets measured against the California median.

Social Security benefits are excluded entirely under 11 U.S.C. § 101(10A)(B). The exclusion is categorical, so even substantial Social Security payments cannot push you over the threshold.

Why Filing Timing Matters

Because the lookback covers six specific months, when you file changes the math. If a bonus, overtime stretch, or temporary job inflated your income several months back, waiting until those earnings fall outside the window can bring your calculated income under the median. For people close to the line, timing is one of the most practical levers available.

If You’re Married but Filing Alone

Married filers living with a spouse have to include that spouse’s income in the calculation even when filing individually. People regularly assume filing alone means only their own earnings count. It doesn’t.

The offset is the “marital adjustment” on Form 122A-2. You can deduct any portion of your spouse’s income that doesn’t go toward shared household expenses: your spouse’s student loan payments, support obligations to another household, tax withholding on their separate income, and debts in their name alone.²

If you and your spouse are legally separated or not living together, you generally don’t include their income at all. Only what they regularly contribute to your household expenses or your dependents counts.

Above the Median: The Means Test

If your annualized income tops California’s median, you must complete Form 122A-2, the Chapter 7 Means Test Calculation. The form asks whether you have enough disposable income to repay a meaningful portion of your debt over five years. Passing doesn’t require low income. It requires showing that your income, after allowed deductions, leaves too little to fund a plan.³

What You Can Deduct

Most expense categories use standardized IRS figures rather than your actual spending. IRS National Standards set fixed amounts for food, clothing, personal care, and out-of-pocket health costs. IRS Local Standards set housing, utility, and transportation amounts tied to the specific California county where you live. You get the standard regardless of what you actually spend.⁴

On top of the IRS standards, you can deduct:

Secured debt payments: your actual monthly mortgage, car loan, and other secured debt payments, averaged over the 60 months after filing
Taxes: income tax, self-employment tax, Social Security, and Medicare withholding
Insurance: health insurance, disability insurance, HSA contributions, and your own term life insurance premiums
Court-ordered obligations: child support, alimony, and similar payments
Childcare and dependent expenses: up to $1,500 per month for each dependent child under 18
Safety expenses: costs incurred to protect your family from domestic violence

These deductions often decide the outcome for California filers, where housing costs and secured debt payments can eat most of a paycheck even when the gross salary looks high.²

The Disposable Income Thresholds

Subtract all deductions and you’re left with a monthly disposable income figure. Multiply by 60 for five years of hypothetical payments. Where that number lands determines what happens:

Below $10,275: no presumption of abuse. You qualify for Chapter 7.
$17,150 or above: abuse is presumed. You need to rebut it or take a different path.
Between $10,275 and $17,150: abuse is presumed only if that amount would cover at least 25% of your nonpriority unsecured debts.

The Judicial Conference adjusted these amounts effective April 1, 2025, and they still apply to 2026 filings.⁴

Rebutting the Presumption

Triggering the presumption isn’t a flat disqualification. The code lets you show “special circumstances” that justify additional expenses or income adjustments with no reasonable alternative. The statute names a serious medical condition and a call to active military duty, but the category isn’t limited to those. You have to itemize each additional expense, attach supporting records, and attest under oath that the numbers are accurate. The adjusted figures must bring your 60-month disposable income below the applicable threshold. Vague hardship arguments don’t clear the bar. Concrete, documented expenses with no workaround do.⁴

Who Skips the Income Test Entirely

Three groups bypass the means test regardless of income. The exceptions are narrower than people expect, but they’re absolute when they apply.

Disabled Veterans

If you’re a disabled veteran and your debts were primarily incurred during active duty or while performing homeland defense activity, the means test does not apply. The statute bars dismissal or conversion based on any form of means testing. No income cap, no disposable income calculation, no presumption analysis.⁴

National Guard and Reservists

Guard members and reservists called to active duty or performing homeland defense activity for at least 90 days after September 11, 2001, are exempt during that service and for 540 days after it ends. The debts don’t have to be service-related. The exception is tied to the timing of service, not the nature of the obligations.⁴

Primarily Business Debt

The means test only applies when your debts are primarily consumer debts. If more than half your total debt is business-related, such as personal guarantees on commercial loans, unpaid business taxes, or vendor obligations, the means test doesn’t apply and no presumption can arise.⁵ Entrepreneurs whose businesses failed and left them personally liable use this path regularly. Whether a particular debt qualifies as business rather than consumer turns on the purpose of each loan at the time it was incurred.

If You Don’t Pass

If the means test shows a presumption of abuse you can’t rebut, your Chapter 7 case won’t simply move forward. The U.S. Trustee or the court can file a motion to dismiss. From there you have options:

Convert to Chapter 13. The most common outcome. You enter a three-to-five-year repayment plan funded by your disposable income. You keep your assets but commit to years of structured payments overseen by a trustee.
Request voluntary dismissal. You can ask the court to dismiss the case entirely, leaving your debts intact but giving you time to regroup. Some filers use this to wait out the six-month lookback and refile later when the calculated income is lower.
Contest the motion. If special circumstances apply, you can fight the dismissal and present evidence. The burden is on you to prove the additional expenses are necessary and documented.

None of this happens on its own. The U.S. Trustee reviews every Chapter 7 filing above the median and decides whether to raise the issue. If no motion gets filed, the case proceeds.

1
U.S. Trustee Program. Census Bureau Median Family Income By Family Size
2
United States Courts. Chapter 7 Means Test Calculation – Form 122A-2
3
United States Department of Justice. Means Testing
4
Office of the Law Revision Counsel. 11 USC 707 – Dismissal of a Case or Conversion to a Case Under Chapter 11 or 13
5
United States Courts. Chapter 7 – Bankruptcy Basics