Attorney at Debt Advisors Law Offices
Practice Areas: Chapter 7 Bankruptcy, Chapter 13 Bankruptcy, Stop Foreclosure
If you’re considering bankruptcy, you’ve probably come across the Chapter 7 “means test.” At first glance, it can feel intimidating like a pass-or-fail exam that decides your financial future. Many people worry that failing the test means the end of the road, but that’s not the case. The means test is simply a way to figure out which type of bankruptcy you may qualify for, and even if you don’t pass, there are other proven paths to debt relief.
This guide explains why the means test exists, how it works, and most importantly, what your options are if you don’t pass. We’ll also look at Wisconsin-specific rules, including Chapter 128, a repayment plan that’s unique to the state. By the end, you’ll see that failing the means test doesn’t close doors; it simply points you toward the option that fits your situation best.
The Chapter 7 means test was created under the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005. Lawmakers wanted to prevent people with higher incomes from using Chapter 7 to erase debts they could potentially repay.
The test is designed to determine whether you qualify for Chapter 7 based on your income and expenses. If your income is too high, the law assumes you might be able to repay some of your debts through a repayment plan instead of total discharge.
The means test has two parts, and both are important in deciding whether you qualify.
Your average household income is compared to the median income for households of your size in Wisconsin. If your income is lower than the state median, you may qualify for Chapter 7 without needing to go further. The U.S. Department of Justice regularly updates the median income levels for each state (DOJ website).
If your income is above the state median, the second part of the test looks at your expenses. It deducts necessary living costs such as housing, food, and transportation. What remains is called disposable income. If little or no disposable income is left, you may still qualify for Chapter 7.
Disposable income is at the heart of this test. The law wants to know whether you realistically have money left to repay creditors.
Failing the Chapter 7 means test is not the end of the road. It simply means you may not be eligible for a full discharge of debts under Chapter 7. Other paths remain open:
This option allows you to reorganize your debts into a structured repayment plan over three to five years. Instead of wiping out all unsecured debt, you repay a portion of it based on what you can afford. Many people prefer this option when they want to keep assets such as a home or car.
Unique to Wisconsin, Chapter 128 provides a way for residents to repay unsecured debts over a period of up to three years without filing bankruptcy. It stops wage garnishments and can lower financial stress while protecting your credit record better than a bankruptcy filing.
In some cases, creditors may agree to negotiate new repayment terms or settle for less than the full balance owed. While this path does not have the legal protections of bankruptcy, it can be a practical solution for some individuals.
“Failing the Chapter 7 means test does not prevent you from seeking relief under Chapter 13 or Wisconsin Chapter 128 repayment.”
Every state has unique laws when it comes to bankruptcy, and Wisconsin offers particular advantages and limitations:
Wisconsin State Courts note that “Chapter 128 is a voluntary debt repayment plan available only in Wisconsin, designed to help residents repay debt without filing bankruptcy.”
A side-by-side comparison can make it easier to understand your choices if you fail the means test:
|
Option |
Eligibility | How It Works | Pros |
Cons |
| Chapter 7 | Pass means test; low income | Discharges most unsecured debt | Quick process; fresh start | Not all debts discharged; impact on credit |
| Chapter 13 | Steady income, failed Ch.7 | 3–5 year repayment plan | Keep assets; structured repayment | Long-term commitment; court supervision |
| Wisconsin Ch.128 | Wisconsin residents only | Repay unsecured debts over 3 years | Stops wage garnishment; avoids bankruptcy | Limited scope; not available outside WI |
Even though the means test can feel intimidating, you do not have to go through it alone. A Wisconsin bankruptcy attorney will review your income, expenses, and overall financial picture to determine whether you qualify for Chapter 7 or if another option is better.
An attorney can also:
“Case outcomes vary depending on individual circumstances. Past results do not guarantee future outcomes.”
It determines if your income and expenses allow you to qualify for Chapter 7 or if you should explore repayment options.
You may still qualify for Chapter 13 or Wisconsin Chapter 128 repayment plans, both of which provide structured paths to manage debt.
Yes. A significant drop in income or increase in expenses may allow you to qualify for Chapter 7 later.
No. Child support, alimony, most taxes, and student loans usually remain even after Chapter 7.
It is a court-supervised repayment plan unique to Wisconsin that helps pay unsecured debts without filing bankruptcy.
While you can attempt it yourself, a bankruptcy attorney ensures accuracy and helps explore alternatives based on your situation.
Failing the Chapter 7 means test does not mean you are out of options. It simply means your path to debt relief may look different. Chapter 13 repayment plans, Wisconsin’s unique Chapter 128, or other debt management strategies may still help you regain control of your finances. Every situation is different, which is why getting the right guidance early can make all the difference.
At Debt Advisors Law Offices, we take the time to explain your options, help you understand the pros and cons, and guide you toward the choice that best fits your needs. Schedule your free consultation today to learn which debt relief option is right for you.
Learn about bankruptcy protections, types of bankruptcy, how to get started, what to expect, and who to trust. Filing bankruptcy is the ONLY way to completely eliminate debt. If bankruptcy is right for you, it offers powerful protections that cannot be achieved through alternative solutions such as hardship relief, loans, or debt settlement.
