The easy answer is “anyone,” but of course, it’s a little more complicated. Chapter 7 and Chapter 13 bankruptcies are available to most individuals (and are the most often used by individuals). Since this website talks mostly about individual bankruptcies (sometimes referred to as “consumer bankruptcies”), I’m going to confine this discussion to chapter 7 and chapter 13 bankruptcies.
Chapter 7
To file a chapter 7 bankruptcy, and discharge your unsecured debts, you either have to be exempt from the “means test,” or you have to pass it. If your income is less than the national median income, you are exempt and you can file a chapter 7.
Passing the means test demonstrates that even though you make more than the median income, your regular income is not enough to pay your ordinary and necessary expenses (it’s a bit more complicated but this is a good place to start). If you want to figure out if you qualify now (before you go any further), you will find the forms and instructions on the Federal Court website (www.uscourts.gov/forms/means-test-forms/chapter-7-means-test-calculation). You can also see my blog post on “How to Pass the Means Test.” If you have trouble filling out the form, or if you don’t pass the test, I am here to help you. Fill out the contact form and let me know how I can help.
Chapter 13
If you do not pass the means test, you may qualify to file a chapter 13 bankruptcy, which means that you will have to pay your creditors a portion of what they are owed, over a three to five-year period. I’ll go into more detail in a future blog post, but here are some of the reasons to file a chapter 13 (in addition to not passing the means test). If you are behind in your mortgage or car payments, a chapter 13 will stop any foreclosure or repossession and give you an opportunity to make up your back payments over the course of your plan. It will also give you some breathing room from being harassed by creditors. However, there are eligibility limits on the amount of debt that you can have if you file a chapter 13. At this time, you cannot have more than $465,275 in unsecured debt (credit card and other debt not secured by any assets) and $1,395,875 in secured debt (your home and car and any other debt secured by any of your assets). Most individuals who are not eligible to file a chapter 7 will be eligible to file a chapter 7.