If you are buried under credit card debt, medical bills, or personal loans, filing for Chapter 7 bankruptcy can feel like a lifeline. It offers a “fresh start” by wiping out most unsecured debts in just a few months. But before you can cross the finish line, there is one major hurdle you must clear: The Bankruptcy Means Test.
Many people worry that their income will disqualify them from filing Chapter 7. Fortunately, the Colorado means test is not a simple pass-or-fail exam, and even higher-income earners are often surprised to find that they can qualify with the right legal strategy.
Here is what you need to know about how the 2026 Colorado bankruptcy means test works and how it affects your journey to becoming debt-free.
What is the Bankruptcy Means Test?
The means test was introduced by Congress in 2005 to ensure that debtors who have the financial “means” to pay back some of their debt are guided toward Chapter 13 bankruptcy (which involves a 3-to-5-year repayment plan) rather than Chapter 7 (which discharges eligible debt completely).
Essentially, the means test analyzes your average household income over the six months before you file and compares it to Colorado’s median family income.
There are two steps to the test. If you pass Step 1, you automatically qualify to file Chapter 7. If you do not pass Step 1, Step 2 allows you to deduct allowed living expenses to see if you still qualify.
Step 1: Compare Your Income to the Colorado Median
The first step of the means test is straightforward. It looks at your Current Monthly Income (CMI), which is your average gross income from all sources (excluding Social Security and certain disaster/military benefits) over the six months immediately preceding your filing date. This average is then annualized (multiplied by 12) and compared to the median income for a household of your size in Colorado.
Because Colorado has a relatively high cost of living, our state’s median income limits are among the highest in the country. The 2026 limits (for cases filed on or after April 1, 2026) are:
- 1-Person Household: $87,940
- 2-Person Household: $109,497
- 3-Person Household: $130,850
- 4-Person Household: $153,501
- For each additional family member above 4, add $11,100.
The “Automatic” Pass:
If your annualized CMI is at or below the Colorado median for your household size, you pass the means test. You can proceed with filing Chapter 7 bankruptcy without filling out any further means-testing forms.
Step 2: What If You Are Above the Median?
If your household income is above the Colorado median, do not panic. You are not disqualified from Chapter 7. It simply means you must complete the second part of the means test.
In Step 2, the court allows you to deduct your necessary, everyday living expenses from your gross income. However, you cannot just use your actual monthly expenses. Instead, the test relies on a mix of your real-world payments and national/local standards set by the IRS for:
- Housing and utilities
- Food, clothing, and household supplies
- Transportation costs (including car payments and operating expenses)
- Taxes, health insurance, and term life insurance
- Court-ordered payments (like child support or alimony)
- Secured debt payments (like your home mortgage)
- Involuntary payroll deductions
Once you subtract all allowable expenses from your average income, the money left over is your disposable income.
If your calculated disposable income over a 60-month period is below a certain statutory threshold (historically under $10,275, though adjusted for inflation over time), you pass the means test, as the court determines you don’t have enough “extra” money to make meaningful payments to your unsecured creditors. If you have “presumed abuse” (too much disposable income), you may need to file a Chapter 13 bankruptcy instead.
Timing is Everything
Because the means test calculates your income based on a strict six-month lookback window, the timing of your bankruptcy filing can be the difference between qualifying for Chapter 7 and having to file Chapter 13.
For example, if you were recently laid off or had your hours cut, waiting a month or two can lower your average six-month income enough to pull you below the median. Conversely, if you recently received a one-time bonus, it might make sense to delay your filing until that bonus falls outside of the six-month lookback period.
At Consumer Law Pro PC, we can help you analyze the exact calendar window to ensure you file at the absolute best strategic moment.
Who is Exempt from the Means Test?
Not everyone has to take the means test. You may be completely exempt if:
- Your debts are primarily non-consumer: If more than 50% of your total debt comes from business operations, business loans, or taxes (rather than personal credit cards or medical bills), the means test may not apply to you.
- You are a disabled veteran: If you incurred your debt primarily while on active duty or performing homeland defense.
Get Help Navigating the Colorado Means Test
The bankruptcy means test is notoriously complex, and even small errors on your forms can result in your case being dismissed or forced into an expensive Chapter 13 repayment plan.
At Consumer Law Pro PC, we specialize in helping families throughout Aurora, Denver, and the surrounding areas navigate the bankruptcy process. We will carefully analyze your income, identify all eligible IRS and local expense deductions, and map out the best strategy to help you obtain the debt relief you deserve.
Call us today or contact us online to schedule your consultation. Let’s check your eligibility and find the fastest path to your financial fresh start.
