What's the Income Limit for a Chapter 7 Bankruptcy?

The income limit to file for a Chapter 7 bankruptcy depends on the state you live in. To find out the limit, you have to compare your income to the median income for a household of the same size in your state. If your income is above the state’s median, you need to pass a means test in order to qualify for a Chapter 7 bankruptcy. Most states require this, and because the median income varies by state, so does the income limit.

The Means Test Simplified

What’s the Income Limit for a Chapter 7 Bankruptcy?Unlike a Chapter 13 bankruptcy, a Chapter 7 bankruptcy is relatively short – typically only lasting three to six months – wherein your trustee liquidates (sells) your non-exempt property to pay off your debts.

The first step of the Chapter 7 means test is to compare your current gross (pre-tax) annual income to the median income for the same size household in your state. You can look this up by visiting the US Trustee website at www.justice.gov/ust and going to the means testing information section.

If you make less than your state’s medium, then you can file for a Chapter 7 bankruptcy without taking any further steps. If you make more, however, you need to take and pass the means test.

When you take the means test, you need to subtract your allowable monthly expenses, including food, clothing, and living expenses, from your pre-tax monthly income. The amount you get is your disposable income, and the lower your disposable income, the more likely it is you qualify for a Chapter 7 bankruptcy.

What if You Don’t Qualify for a Chapter 7?

If you calculate your disposable income and find that you have too much, you won’t qualify for a Chapter 7 bankruptcy. In this case, you can file a Chapter 13 bankruptcy, instead.

A Chapter 13 takes longer to complete than a Chapter 7 – either three or five years – but you usually get to keep your assets, and you have a better chance of qualifying for financing while the bankruptcy is open, if you find you need it.

Ready to Start the Financing Process?

Before you consider filing for bankruptcy, make sure you weigh all possible options and talk to a lawyer and your lenders ahead of time. Filing for bankruptcy, whether it’s a Chapter 7 or Chapter 13, shouldn’t be taken lightly, and should be a last resort option.

If you lost your vehicle in a Chapter 7 bankruptcy that's now discharged, we can help you get back behind the wheel if you need another auto loan. The Car Connection specializes in helping consumers dealing with credit issues like bankruptcy find financing.

We do this by connecting them to local dealerships that know how to handle bad credit. To get the process of getting matched to a dealer near you started, all you have to do is fill out our simple and free car loan request form.


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