Bankruptcy Basics

To file for bankruptcy, you need to meet certain qualifications. Within 180 days before filing, you must receive credit counseling from an approved credit counseling agency in an individual or group briefing. In addition, if a previous bankruptcy filing was dismissed within the last 180 days due to failure to comply with court orders, you are not eligible to file for bankruptcy.

Means Testing for Chapter 7 Bankruptcy

To qualify for Chapter 7 bankruptcy, you must pass the means test if your debts are considered to be primarily consumer debts. The means test compares your income over the six months before filing for bankruptcy to the median income for a household of your size in your state. If your income is below the median, you automatically qualify to file for Chapter 7 bankruptcy. If your income is above the median, you will be required to complete additional calculations to determine whether you qualify.
The Census Bureau’s Median Family Income Data is updated periodically. For cases filed on or after April 1, 2023, the median family incomes for New York and California, the state where I practice bankruptcy law, are as follows:
California
One Person: $75,235
Two People: $93,175
Three People: $104,785
Four People: $122,707
New York
One Person: $68,814
Two People: $84,958
Three People: $103,444
Four People: $126,167

Chapter 13 Bankruptcy: Qualifications

Only an individual or a married couple can file for Chapter 13 bankruptcy. A corporation isn’t eligible for Chapter 13.

Chapter 13 bankruptcy involves repaying a portion of your debts over a 3-5 year period. To be able to do so, you must prove that you have a regular source of income to fund your repayment efforts while also covering your regular monthly living expenses.

Your income can include wages, self-employment income, pension, social security benefits, and other sources. If you don’t have regular income sufficient to meet your requirements, the bankruptcy court may allow a relative or friend to contribute to your repayment plan.

Finally, you’re eligible to file for Chapter 13 bankruptcy so long as your total secured and unsecured debt is less than $2,750,000 as of the date you file your case. This includes the total balance of your mortgages, car loans, tax debts, and unsecured debt (such as credit cards, medical bills, and personal loans). Your debt counts towards this limit even if you’re current on your payments.

If You Previously Filed for Bankruptcy

Even if you qualify to file for bankruptcy, you may not be eligible to receive a discharge of your debts if you previously filed a case. Though that would likely make bankruptcy pointless in most situations, sometimes it still makes sense to consider the option for other reasons.

You aren’t eligible for discharge in a Chapter 13 bankruptcy if you received a discharge in a Chapter 7, Chapter 11, or Chapter 12 case filed within the last four years, or a Chapter 13 case filed within the last two years.

You’re not eligible for a Chapter 7 bankruptcy discharge if you received a bankruptcy discharge under Chapter 7 or Chapter 11 within the last eight years or under Chapter 12 or Chapter 13 within the last six years.