The answer depends on several factors, including your income, your debts, your assets, your prior bankruptcy history, and the type of bankruptcy you are considering.
The Short Answer
Many people do qualify for bankruptcy, but the type of bankruptcy they qualify for is not always the same. For most individuals, the question is usually whether Chapter 7 or Chapter 13 is the better fit. Chapter 7 has eligibility rules that include a means test, while Chapter 13 generally requires regular income and compliance with debt-limit rules.
That is why the real question is often not just, “Do I qualify?” It is, “Which bankruptcy option do I qualify for, and which one makes the most sense for my situation?”
The Two Most Common Types of Bankruptcy for Individuals
Most individuals who file bankruptcy do so under Chapter 7 or Chapter 13 of the Bankruptcy Code. Each has different rules and serves a different purpose.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is often referred to as a liquidation bankruptcy, but that does not mean a person automatically loses everything. In many cases, people are able to protect important property through exemptions. The main purpose of Chapter 7 is to discharge many types of debt and give the filer a financial fresh start.
Chapter 7 is commonly used to address unsecured debts such as:
- credit card balances
- medical bills
- personal loans
- certain judgments
How Chapter 7 Qualification Usually Works
To qualify for Chapter 7, an individual must complete the required eligibility analysis, including the means test when applicable. The means test compares income and certain allowed expenses to determine whether a presumption of abuse arises under the law. Median income figures are part of that analysis, and those figures are updated periodically.
In general, if a household’s income is below the applicable median for a household of the same size in the filer’s state, Chapter 7 qualification is often more straightforward. If income is above the median, additional calculations are required. Being above median income does not automatically mean someone cannot file Chapter 7, but it does mean a closer analysis is needed.
Even if someone does not qualify for Chapter 7, they may still qualify for Chapter 13.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy allows individuals to reorganize debt into a repayment plan that usually lasts three to five years. Unlike Chapter 7, Chapter 13 is not primarily about liquidating non-exempt assets. Instead, it allows a debtor to keep property while repaying all or part of debts over time under court supervision.
Chapter 13 can be particularly helpful for people who want to:
- stop foreclosure and catch up on missed mortgage payments
- prevent vehicle repossession
- repay certain debts over time
- consolidate unsecured debts into more manageable payments
How Chapter 13 Qualification Usually Works
Chapter 13 is available only to individuals, including sole proprietors, who have regular income sufficient to fund a repayment plan. It is not available to corporations or LLCs. Chapter 13 also has debt-limit requirements, and those dollar amounts can change over time due to statutory adjustments.
Although Chapter 13 does not use the Chapter 7 means test in exactly the same way, income still matters. Income and disposable income affect issues such as plan feasibility and, in some cases, whether the repayment period is three years or five years.
Because of that, people with higher income often explore Chapter 13 when Chapter 7 is not the best fit.
Other Factors That Can Affect Bankruptcy Eligibility
Previous Bankruptcy Filings
The law places limits on how often someone can receive a discharge. The time between filings depends on the chapter filed before and the chapter being filed now. For example, there is commonly an eight-year period between a Chapter 7 discharge and another Chapter 7 discharge, and different rules may apply for Chapter 13 cases or mixed chapter situations.
Prior filings do not always prevent a new case, but they can affect eligibility for a discharge or the protections available in the new case.
Type of Debt
Bankruptcy is often most effective for unsecured debt, such as credit card debt, medical bills, and personal loans.
Some debts are more difficult, or in some cases impossible, to discharge in an ordinary bankruptcy case. These may include:
- child support
- alimony or domestic support obligations
- certain tax debts
- many student loan obligations
- debts involving fraud or other misconduct, if properly established in the case
That said, bankruptcy may still help even when some debts remain. Discharging other debt can free up income and make remaining obligations more manageable.
Credit Counseling Requirement
Most individual debtors must complete a credit counseling briefing from an approved provider before filing bankruptcy. In general, that briefing must be completed during the 180 days before the case is filed.
There is also typically a separate debtor education requirement after filing and before discharge.
Signs Bankruptcy May Be Worth Exploring
Whether someone qualifies depends on the full facts, but there are some common signs that bankruptcy may be worth discussing with an attorney.
- you are relying on credit cards to cover basic living expenses
- creditors are suing you or threatening wage garnishment
- you are facing foreclosure or repossession
- minimum payments have become unmanageable
- collection calls and financial stress are constant
When several of these issues are happening at the same time, bankruptcy may be one possible solution worth evaluating.
Why Florida Bankruptcy Cases Need Florida-Specific Analysis
Bankruptcy is federal law, but some of the most important issues in a case depend on where the case is filed and the facts involved. Florida residents generally use Florida exemptions rather than the federal exemption system, and income figures used in eligibility analysis are updated periodically.
That is why general online bankruptcy information can only go so far. A Florida-specific review is important before making a decision.
Bottom Line
Many people who are struggling with debt do qualify for some form of bankruptcy relief.
Whether you qualify for Chapter 7, Chapter 13, or another option depends on your income, debts, assets, prior filings, and financial goals. Bankruptcy is not limited to people with no income or no property.
If you are wondering whether bankruptcy may be an option, the best next step is to have your situation reviewed carefully so you can understand which chapter, if any, fits your needs. Contact our office to learn more.
Frequently Asked Questions About Bankruptcy Qualification
Do I qualify for Chapter 7 bankruptcy if I have a job?
Possibly. Having income does not automatically prevent someone from filing Chapter 7. Eligibility depends on the means test and the full financial analysis.
Can I still qualify for bankruptcy if I make too much money?
Possibly. A higher income may make Chapter 7 more complex, but it does not automatically rule out bankruptcy. Some individuals may qualify for Chapter 13 instead.
Does Chapter 13 have income requirements?
Chapter 13 generally requires regular income sufficient to support a repayment plan and compliance with applicable debt limits.
Can I file bankruptcy if I filed before?
Maybe. Prior filings do not always prevent a new case, but they can affect eligibility for discharge and timing requirements.
Do I have to take a class before filing bankruptcy?
Most individuals must complete a credit counseling course from an approved provider before filing, typically within 180 days of the filing date.
