Qualifying for Bankruptcy in San Jose – Bankruptcy Means Test

I live in San Jose and have a good job. Can I still qualify for Bankruptcy In Santa Clara County?

Bankruptcy Means TestWhich chapter you will be eligible for depends on the means test. Even though you have a good job, living in the South Bay can be expensive, and the cost of living in Silicon Valley can make it challenging to keep up with your bills. Bankruptcy might be a wise option even though you have a good job. 

What is the Means Test, and How Does it Work?

A ‘Means Test’ is a tool that bankruptcy courts use to determine whether an individual debtor qualifies for relief under Chapter 7 of the Bankruptcy Code. 

This ‘means test’ was added to the Bankruptcy Code to create rules for determining who deserves bankruptcy relief in Chapter 7 and who should be in chapter 13.

Let’s break down how this works.

The means test is determined by calculating your income for the last six months to the median income for the state. Many people living in the San Jose area earn an income well past the median for the state. If your income is less than or equal to the state median income, you pass the means test on the first try and may file Chapter 7. 

If your income is above the median, you will go through the means test calculation using a combination of actual and standardized expenses.  To pass this second part of the means test, you need to have insufficient disposable income left to pay your creditors after you spend all your reasonable living expenses (as determined by the means test standards.) The good news is that due to the cost of living in San Jose, Gilroy, Milpitas, Santa Cruz, Santa Clara, and surrounding cities, many higher-income people can still qualify for chapter 7 and pass the means test.

Failing the means test does not mean you can’t file for bankruptcy; it just means that Chapter 7 isn’t available. Chapter 13 is often a brilliant financial decision. 

Important Exceptions to the Means Test

You can take the means test if your debt is less than 50% business or tax debt. A large student loan debt will sometimes qualify you for a chapter 7 under the business bankruptcy exception. 


The means test can be confusing and complicated, so it’s essential to consult with a bankruptcy attorney before making any decisions about filing for bankruptcy. An experienced San Jose bankruptcy attorney can help you understand whether you qualify for Chapter 7 bankruptcy or if chapter 13 is your option and guide you through each step of the process. Our office is located in downtown San Jose, and we gladly offer free phone consultations to discuss your bankruptcy options and the means test rules and strategies.