You’re staring at a mountain of debt that keeps growing despite your best efforts. Medical bills from an unexpected hospital stay. Credit cards maxed out from trying to keep your family afloat. Collection calls that won’t stop. You’ve heard Chapter 7 bankruptcy might offer relief, but then someone mentions “the means test” and suddenly the path forward feels unclear.
Here’s what you need to know: the Oregon bankruptcy means test isn’t a barrier designed to deny you help. It’s a financial assessment tool that ensures Chapter 7 relief goes to people who genuinely need it. Once you understand how it works, the process becomes far less intimidating than it first appears.
What Is the Oregon Bankruptcy Means Test?
The bankruptcy means test became law in 2005 when Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act. This legislation added a calculation to prevent people with sufficient income from using Chapter 7 to discharge debts they could reasonably repay through a structured plan.
Under 11 U.S.C. § 707(b), the means test determines whether granting you Chapter 7 relief would constitute an abuse of the bankruptcy system. The test compares your income against Oregon’s median income levels, then examines your expenses to calculate whether you have funds remaining each month to pay creditors.
The process works in two stages. First, your household income gets compared to Oregon’s median income for your family size. If you fall below that median, you pass automatically. If your income exceeds the median, you proceed to the second stage where allowable expenses get subtracted from your income. If insufficient money remains to fund a meaningful repayment plan, you still qualify for Chapter 7.
Who Must Take the Means Test in Oregon?
Not everyone filing Chapter 7 in Oregon completes the means test. The requirement only applies if your debts are primarily consumer debts. Under 11 U.S.C. § 101(8), consumer debts are those incurred by an individual primarily for personal, family, or household purposes. Credit card purchases for groceries qualify. Medical bills qualify. Personal loans for household expenses qualify.
Business debts don’t count as consumer debts. If you’re a small business owner and more than half your debt stems from business credit cards, supplier accounts, or business loans, the means test doesn’t apply regardless of your income level.
Disabled veterans defined as those rated at least 30% disabled by the VA or discharged due to a service-connected disability who incurred their debts primarily while on active duty are exempt from the means test. Separately, active duty National Guard and Reserve members who serve 90 days or more are also exempt during their service period and for 540 days afterward. If either exemption applies, you’ll complete Official Form 122A-1Supp instead of the standard means test forms.
How Does The Bankruptcy Means Test Portland OR Work?
Part One: The Income Comparison
The first part examines your current monthly income, which has a specific legal definition. Your current monthly income represents the average of your gross income from all sources during the six full calendar months before filing bankruptcy.
If you file in June, you’d calculate your average monthly income using gross income from December through May. Add those six months together and divide by six. That figure is your current monthly income.
For cases filed on or after April 1, 2026, Oregon median income thresholds are:
- 1 person: $79,089
- 2 people: $93,670
- 3 people: $116,729
- 4 people: $140,024
For households exceeding four people, add approximately $11,100 for each additional person. Always verify the current per-person increment with the U.S. Trustee’s official median income table, as figures are updated approximately every six months.
If your annualized income (current monthly income multiplied by 12) falls below the median for your household size, you’ve passed the means test. Your Chapter 7 case won’t be presumed abusive under federal bankruptcy law.
Part Two: The Expense Deduction Test
If your income exceeds Oregon’s median, you advance to Official Form 122A-2, the Chapter 7 Means Test Calculation. This form subtracts allowed expenses from your income to calculate monthly disposable income.
Allowed expenses fall into several categories. Some use national standards set by the IRS. Others apply local standards specific to Oregon counties. Deductible expenses include:
- Housing and utilities – If you rent or have a mortgage, you can deduct your actual payment up to the IRS local standard for your county.
- Food, clothing, and personal care – These follow national standards based on household size.
- Transportation – Both car ownership costs (loan or lease payments) and operating expenses (gas, insurance, maintenance) qualify.
- Health care – Out-of-pocket medical expenses beyond the national standard can be deducted with proper documentation.
- Taxes – Mandatory payroll deductions for income tax, Social Security, and Medicare get subtracted.
- Secured debt payments – Current mortgage or car loan payments on property you’re keeping count as deductions.
- Court-ordered payments – Child support or alimony you’re legally required to pay qualifies.
After subtracting all allowed expenses from your current monthly income, you arrive at your monthly disposable income. This number gets multiplied by 60 (representing a five-year Chapter 13 repayment plan).
If your calculated disposable income falls below the current federal threshold amounts, you may still qualify for Chapter 7. If your disposable income exceeds the current federal threshold amounts, a presumption of abuse may arise.. Disposable income between these amounts requires an additional calculation involving the percentage of unsecured debt you could repay.
What Income Gets Included in the Means Test?
The bankruptcy code requires reporting of most income sources. You must include:
- Wages and salaries from all employment
- Self-employment income (gross receipts minus ordinary business expenses)
- Rental income from properties you own
- Interest and dividends from investments
- Pension and retirement distributions you actually receive
- Unemployment compensation
- Workers’ compensation benefits
- Contributions from others toward household expenses
Equally important is what you don’t include. Social Security benefits and certain other retirement income don’t count toward the means test. If you receive Social Security disability or retirement benefits, those funds get excluded from your current monthly income calculation. Payments received as a victim of war crimes or payments related to declared national emergencies also don’t count.
This exclusion significantly benefits retirees living primarily on Social Security who have some part-time work income. Only the work income counts in the means test calculation.
How to Pass the Bankruptcy Means Test in Oregon 2026
Passing the means test requires presenting an accurate financial picture while claiming every legitimate deduction available under federal law. Here are practical approaches:
Time your filing strategically – The six-month lookback period matters. If you received a one-time bonus or worked significant overtime during recent months, waiting might drop those high-income periods from your calculation window. Similarly, if you recently lost your job, the past six months might reflect income you no longer earn.
Include all household members – Median income thresholds increase with household size. Count everyone who qualifies. Your children count. Other dependents living with you may count as well, depending on your relationship and financial support.
Document special circumstances – Federal bankruptcy law allows arguing that special circumstances justify additional expenses or income adjustments. Serious medical conditions requiring ongoing treatment, active military duty calls, or supporting a disabled family member are examples. While these won’t automatically guarantee passage, they provide grounds to challenge an abuse presumption.
Maximize legitimate deductions – Claim every entitled deduction. Mandatory work uniforms or tools can be deductible. Documented medical expenses above the standard allowance should be included. Student loan payments might qualify as contractually obligated payments depending on the loan type and payment plan.
Consider your filing status – Married filers generally must include spousal income even if the spouse isn’t filing. However, legally separated couples (not merely living apart) might only include individual income. These rules get complex, and local bankruptcy court practices in Oregon may vary.
What Happens If You Don’t Pass the Means Test?
Failing the means test doesn’t mean you’re out of options — it simply means Chapter 7 isn’t available under the standard calculation. Depending on your situation, Chapter 13 or other debt relief paths may still provide meaningful relief.
- Case dismissal or conversion is possible. The U.S. Trustee or a creditor may file a motion to dismiss or convert your case to Chapter 13.
- Chapter 13 uses a repayment plan. Instead of liquidating assets, you repay debts over three to five years through a court-appointed trustee.
- Debt limits apply. Unsecured debts must be under $526,700; secured debts under $1,580,125 — thresholds most filers won’t exceed.
- Chapter 13 can stop foreclosure. It gives you time to catch up on missed mortgage payments and restructure car loans.
- Some secured debts can be reduced. Certain loans may be reduced to the collateral’s actual value, lowering what you owe.
- Chapter 13 sometimes beats Chapter 7. Even when both options are available, Chapter 13 may better protect your assets and financial goals.
- Non-bankruptcy options exist too. Debt settlement, direct payment plans, and credit counseling are worth considering if bankruptcy isn’t the right fit.
Key Takeaways
- The Oregon bankruptcy means test determines Chapter 7 eligibility by comparing your income to state median levels and evaluating your allowable expenses.
- Current Oregon median income ranges from$79,089 for one person to $140,024 for four people, with additional amounts for larger households. These figures update approximately every six months.
- Income below Oregon’s median for your household size means you automatically pass the first part without completing expense calculations.
- The means test uses your average gross income from the six months before filing, but excludes Social Security benefits and certain other retirement income.
- Allowed expense deductions combine national IRS standards and Oregon-specific allowances for housing, transportation, food, clothing, and documented medical costs.
- Even with above-median income, you may still qualify for Chapter 7 if allowable expense deductions leave insufficient disposable income to fund a Chapter 13 plan.
- Strategic filing timing can impact results, particularly if you’ve experienced recent income fluctuations or received one-time payments.
- Failing the means test doesn’t end your options. Chapter 13 bankruptcy remains available and may better address your specific financial goals.
Frequently Asked Questions
Q: Can I file Chapter 7 while employed?
A: Yes. Employment doesn’t automatically disqualify you from Chapter 7. Qualification depends on whether your income falls below Oregon’s median for your household size, or if above median, whether you lack sufficient disposable income after expenses to fund a repayment plan.
Q: What if I recently lost my job but the six-month period shows higher income?
A: Changed circumstances can be presented to the court. If your income dropped significantly since the calculation period, you can submit evidence of your current situation. Courts recognize the backward-looking calculation sometimes doesn’t reflect present financial reality.
Q: Do both spouses’ incomes count if only one files?
A: Generally, yes. The means test includes household income, typically meaning both spouses’ income gets included even when only one files. Exceptions exist for legally separated couples or certain situations involving separate household maintenance.
Q: How often do median income figures change?
A: The U.S. Trustee updates median income figures approximately every six months, usually in spring and fall. Always verify current figures when preparing to file because outdated numbers could affect your case outcome.
Q: Can medical debt affect my means test results?
A: Medical debt itself doesn’t alter the calculation, but ongoing out-of-pocket medical expenses you’re currently paying can be deducted when calculating disposable income. Document expenses exceeding the national standard allowance carefully.
Q: What happens after failing the means test?
A: If the means test creates an abuse presumption, the U.S. Trustee or a creditor may file a dismissal motion. Courts typically provide time to convert your case to Chapter 13, or the case gets dismissed. This doesn’t prevent filing Chapter 13 or pursuing other debt relief methods.
Get the Fresh Start You Deserve
Calculating the means test independently can feel overwhelming. One mistake in income reporting or a missed legitimate expense deduction could affect your Chapter 7 eligibility. You don’t need to navigate this process alone.
At Michael D. O’Brien & Associates, P.C., we help people throughout Oregon work through means test calculations and determine the best path forward for their unique circumstances. We’ll review your income and expenses, identify deductions you might have overlooked, and help you decide whether Chapter 7, Chapter 13, or another option serves your needs best.
Your financial fresh start begins with one conversation. We’ll examine your complete financial picture and provide honest guidance about your options. No judgment. No pressure. Just clear answers to your questions and a path forward that makes sense for your situation.
Ready to take the first step toward becoming debt-free? Reach out to us today for a free consultation. We serve clients throughout Portland and the surrounding areas, and we’re committed to helping you move forward with confidence.