The easy answer is “anyone,” but like most things, it’s a bit more complicated. Chapter 7 and Chapter 13 bankruptcies are available to most individuals (and are the most often used by individuals). These chapters are often referred to as “consumer bankruptcies”).
Chapter 7
To file a chapter 7 bankruptcy, and discharge your unsecured debts, you either have to be exempt from the “means test” because your annual income is less than the median income in your state for a family of your size or, if your income is more than the median income, you have passed the second part of the means test and you can file a chapter 7. Here’s the chart of median incomes, by state:
If your income is above the median listed above, the next step is based on a combination of your actual expenses in some categories, and state or national averages in others. This second step in 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.
Chapter 13
If you do not pass the means test, you will probably qualify to file a chapter 13 bankruptcy. In chapter 13, you will pay your creditors a portion of what they are owed, over a three to five-year period. I go into more detail in another 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. Currently, the limit is $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.
Chapter 13 is a complicated and expensive process and only a small percentage of people who file a chapter 13 succeed in confirming a plan and making all of the plan payments.
If you quality for chapter 7, and there aren’t other reasons for filing chapter 13, chapter 7 is the best option.