To be eligible for help with debt, you may need to pass a means test.
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If youâre going through a rough financial patch, you may qualify for help through government assistance or bankruptcy relief, but youâll likely need to pass a means test first.
Means testing is the process of reviewing your income and assets. Government programs use it to ensure benefits go to those who are most in need. Bankruptcy courts apply the same kind of review to decide whether you can wipe out debts under Chapter 7 or need to repay them through Chapter 13.
Key Points
- Means testing is a review of your finances used to determine eligibility for government assistance programs and bankruptcy options.
- Government programs such as Supplemental Security Income (SSI) and Medicaid use means tests to target benefits to those with limited income and assets.
- In bankruptcy, a means test determines whether you can file for Chapter 7 liquidation or must repay your debts under Chapter 13.
How government programs use means testing
Government funds are limited, so means testing helps to direct assistance to those with the greatest financial need. It sets income and asset thresholds to decide who qualifies for a range of federal programs.
Supplemental Security Income (SSI)
Administered by the Social Security Administration, SSI helps the elderly, blind, and those with disabilities who have limited income and assets. In 2025, individuals canât exceed $2,000 in countable assets ($3,000 for couples), and their income must be below the federal poverty level.
What is a countable asset?
Despite the name, a countable asset isnât something you can simply count, like a bunch of marbles. Itâs a label the government applies to certain belongings when evaluating your financial need.
Money or assets that you can convert to cash, like savings, investments, or property that isnât your main residence, are countable and determine your eligibility. Programs exclude essentials such as your home, primary vehicle, and basic personal items from consideration because those arenât seen as spendable.
Each program sets its own rules, but the idea is the same: Countable assets are the ones that could help you cover your expenses, so they count against your eligibility.
Run by the U.S. Department of Veterans Affairs, this program provides monthly payments to qualifying veterans who served in active duty and need financial help. In 2025, the net worth limit is $159,240, excluding a primary home and personal belongings.
This joint federal and state health care program offers coverage to individuals with low incomes and limited resources. Itâs overseen by the Centers for Medicare & Medicaid Services. Most states cap income at or below 138% of the federal poverty level for adults, with more flexible rules for children, pregnant women, and others. Eligibility depends in part on whether a state has expanded Medicaid.
What is Medicaid expansion?
The Affordable Care Act gave states the option to expand Medicaid to cover more low-income adults, particularly those without children. In states with expanded Medicaid, adults earning up to 138% of the federal poverty level may qualify.
As of 2025, 40 states and Washington, D.C., have expanded Medicaid. Ten states have not, which means eligibility is more limited and often excludes childless adults with low incomes.
Supplemental Nutrition Assistance Program (SNAP)
Managed by the U.S. Department of Agriculture, SNAP helps low-income households buy groceries. Eligibility is based on both gross and net income. In most states, gross income must be under 130% of the federal poverty line, and net income under 100%. Many states exclude certain tax credits and no longer use asset tests.
Are Social Security and Medicare means-tested?
Unlike some other federal benefits, these two programs donât rely on traditional means testing. But in recent years, theyâve been at the center of heated budget debates over whether financial limits should apply.
Social Security is treated as an earned benefit: Workers pay into the system through payroll taxes and later receive monthly retirement income.
Higher-income retirees pay taxes on up to 85% of their Social Security benefits, but their payments arenât reduced or denied based on wealth. Some lawmakers argue that limiting or cutting benefits for the highest earners would help extend the programâs solvency. Critics warn that turning Social Security into a need-based benefit would undermine broad public support.
Medicare is a federal health insurance program for those age 65 and older and younger individuals with disabilities. It doesnât apply means testing to determine who qualifies; most recipients become eligible based on age or disability status. But income can affect how much you pay in monthly premiums. In 2025, individuals with incomes over $103,000 paid more for Medicare parts B and D. Supporters say this income-based pricing helps control costs. Critics argue it penalizes beneficiaries with modestly higher incomes and could pave the way for full means testing and make Medicare less universal.
How Chapter 7 means testing works
Chapters 7 and 13 are the two main ways individuals can file for bankruptcy. Chapter 7 involves liquidation, where a trustee sells certain nonexempt assets to pay creditors. Chapter 13 sets up a repayment plan that lets you keep your assets while paying off debts over time.
To qualify for Chapter 7, you must pass a means test, which has two main steps:
- Income comparison. A judge reviews your monthly incomeâyour average monthly income over six months before filingâand compares it to your stateâs median income for similar household sizes. If your income is below the median, you automatically qualify for Chapter 7.
- Disposable income comparison. If your income is above the median, you must provide a more detailed financial breakdown. The court then subtracts certain allowed expenses, such as housing, food, and health care, to determine your disposable income. Social Security income is excluded. If whatâs leftâyour disposable incomeâis above a certain threshold, the court may determine you can repay some debts and require you to instead file under Chapter 13.
Although both forms of bankruptcy offer debt relief, the differences are significant. Chapter 7 often discharges unsecured debts after liquidating nonexempt assets (assets not needed for everyday living) and stays on your credit report for 10 years. Chapter 13 requires repayment of a substantial portion or all of your debts over three to five years and stays on your credit report for seven years.
Whatâs counted in a means test
Whether for government benefits or bankruptcy, most means tests review your gross income from a wide range of sources, including:
To determine how much of your income counts toward eligibility, program rules allow for certain deductions from your gross income. For example, government assistance programs often let you subtract medical expenses. When it comes to bankruptcy, courts permit deductions for everyday living costsâsuch as food, housing, and transportationâalong with secured debt payments (like mortgages and car loans), child support, tax obligations, and health insurance.
How means testing applies to you depends on your financial situation and whether youâre seeking government assistance or considering bankruptcy. Strict asset and income limits may make it harder to qualify for help if youâre facing high medical costs in retirement and canât afford them on your own. If youâre struggling with debt, failing a means test could mean filing for Chapter 13 instead of Chapter 7, or turning to other forms of relief, such as credit counseling or negotiating with creditors.
If youâre working to manage expenses while navigating assistance programs, this video can help you build a budget that fits your current situation.
Want to put yourself on solid financial footing? Start with two simple steps: make a budget, and live within it.
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