Beyond the Means Test: A 2026 Strategy for Bankruptcy & Creditor Lawsuits

Most bankruptcy blogs make a dangerous mistake: they tell you that passing the Means Test is the finish line and you automatically qualify for Chapter 7 bankruptcy.

As I tell my clients and law students, passing the Means Test is only the starting line. Qualifying for Chapter 7 isn’t just about your last six months of income; it’s about your disposable income, your unprotected assets, and the timing of your filing.

By Alexander Hernandez, J.D., Professor, and Author of Consumer Bankruptcy Law (Routledge).

🎙️ Listen: The 5-Minute Strategy Session

If you’re on the go, listen to this quick audio summary of the 2026 bankruptcy law.

The Chapter 7 vs. Chapter 13 Reality Check

Initially, everyone leans toward Chapter 7 because it’s faster, easier, and they read they can wipe out all their debt. But that choice often changes once Schedules I and J of the bankruptcy petition are considered.

Schedule I (Income)

While the Means Test looks at the last 6 months of income, Schedule I looks at income for the month of filing. So even though you may have passed the Means Test and your income is below the state’s average, if you have disposable income, you could be pushed towards a Chapter 13 bankruptcy.

Schedule J (Expenses)

Schedule I must be compared to Schedule J, where your expenses are listed. Not only does disposable income have to be minimal, if your expenses are too high or you are paying for luxury goods and services, the trustee is likely to object. This would increase your disposable income, potentially resulting in a Chapter 13 bankruptcy.

Professor’s Note: The figures for the Means Test changed recently. For the latest income figures for your state, please review this prior article.

Please follow these links to learn more about completing Schedule I and Schedule J in my “How to File for Bankruptcy Series.”

The “Equity Eater”: Why Ignoring Lawsuits is Expensive

I see it constantly: a debtor gets served with a lawsuit and ignores it, thinking, “I’ll just file for bankruptcy later.” Here is the danger: If that creditor gets a Judgment Lien, they attach the lien to your home or other property, such as your car.

Can the creditor(s) take your home? No! Instead, that lien sits there, accumulating interest. So a creditor won’t take your home, but they will take your equity. By the time you sell your home, refinance, or get a divorce, your equity is gone.

To learn more about protecting yourself in a lawsuit, read this article.

Using “Discovery” to Buy Your Future

If you aren’t ready to file for bankruptcy immediately, you can use the Discovery Phase of a lawsuit (the exchange of relevant financial documents) to slow the process down.

Slow Down the Case: Discovery automatically buys you time to get your finances in order.

The Dismissal Opportunity: If the creditor can’t produce the documents you’ve requested, you may be able to move for a dismissal before ever needing to file for bankruptcy.

The Professor’s Toolkit: To learn more about Discovery, read this article. In this article, I explain objections and when to seek a dismissal of the case.

Your 2026 Bankruptcy Plan

Bankruptcy isn’t a “one-size-fits-all” solution. Whether you are dealing with creditors who are seeking to freeze your bank account, garnish your wages, or place a lien on your home, you have to be proactive and take immediate steps to protect yourself.

• Read the 2026 Chapter 7 Guide.
• Read the 2026 Chapter 13 Guide.

Colleges and universities can purchase my bankruptcy law textbook directly from Routledge Publishing. Paralegals and students who are buying single copies can do so via Amazon Books. To access my YouTube channel, click this link.

You can learn more about filing for bankruptcy and the bankruptcy petition via this link. Information on the bankruptcy court system, contact information for trustees, and your state’s exemptions can be found here. The federal bankruptcy exemptions are listed here. The latest version of the 341 Meeting of the Creditors can be found here.

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Please note that the information on this site does not constitute legal advice and should be considered for informational purposes only.