If you’re struggling with debt, one of the first questions you may have is: Do I qualify for Chapter 7 bankruptcy? Chapter 7 bankruptcy can provide eligible individuals with a way to address certain debts and move toward a financial fresh start. But qualifying isn’t determined by one simple factor. Your income, household size, expenses, assets, debts, and recent financial activity can all play a role.
At The Law Offices of Bryan Yaldou, PLLC, we help individuals and families throughout Downriver and Southeast Michigan understand whether Chapter 7 bankruptcy may be an option for their particular financial circumstances.
Who Qualifies for Chapter 7 Bankruptcy in Michigan?
Eligibility for Chapter 7 bankruptcy depends on several factors, including your financial circumstances and requirements under federal bankruptcy law.
One important consideration is income. The Chapter 7 means test generally compares your household income with the applicable median income and, when necessary, considers certain allowed expenses and other financial information. But income alone does not tell the entire story.
Someone with a steady job may still qualify for Chapter 7 bankruptcy. Likewise, earning above the applicable median income does not necessarily mean you should assume Chapter 7 is unavailable without having your individual circumstances evaluated.
That’s one reason speaking with an experienced bankruptcy attorney can be valuable before deciding whether you qualify.
Can I File Chapter 7 Bankruptcy if I Have a Job?
Yes, having a job does not automatically prevent someone from filing Chapter 7 bankruptcy. This is one of the most common bankruptcy misconceptions we hear.
Chapter 7 isn’t reserved only for people who are unemployed or have no income. Eligibility depends on your broader financial picture, which can include household income, family size, allowable expenses, debts, and other circumstances.
If you’re working but struggling to keep up with credit cards, personal loans, medical bills, collections, or other debt, it may still be worth exploring whether Chapter 7 is an option.
Is There an Income Limit for Chapter 7 Bankruptcy?
There isn’t one universal Chapter 7 income limit that applies to everyone.
The means test uses income standards that can vary based on factors such as household size and where you live, and those figures are periodically updated. Depending on your circumstances, additional calculations may also be necessary.
This is why searching for a single number online can sometimes be misleading. A Michigan bankruptcy attorney can review your current financial information and help you understand how the Chapter 7 eligibility requirements apply to you.
Do I Have Too Much Debt (or Not Enough Debt) to File Chapter 7?
Chapter 7 eligibility isn’t simply determined by reaching a particular amount of debt.
What often matters more to the person considering bankruptcy is whether the debt has become realistically manageable.
You may be making minimum credit card payments every month but watching balances barely change. You may be using one form of credit to pay another bill. Collection calls or wage garnishment may have begun. Or perhaps your monthly debt obligations simply leave too little money for ordinary household expenses.
These can all be reasons to speak with a bankruptcy attorney and find out what options are available rather than waiting for the situation to become more difficult.
Will I Lose My House or Car if I File Chapter 7?
Filing Chapter 7 does not automatically mean you will lose everything you own! Fear of losing a house, car, retirement savings, or other property prevents many people from even exploring bankruptcy.
Bankruptcy law provides exemptions that may protect certain property, but what happens to an individual asset depends on the facts of the case, including its value, equity, applicable exemptions, liens, and other circumstances.
If keeping particular property is one of your biggest concerns, tell your bankruptcy attorney before filing. Understanding how bankruptcy could affect your assets should be part of determining whether Chapter 7 is appropriate for you.
What Types of Debt Can Chapter 7 Address?
Chapter 7 can potentially discharge many types of unsecured debt, including certain:
• Credit card balances
• Medical bills
• Personal loans
• Collection accounts
• Other qualifying unsecured debts
Not every debt can be discharged through bankruptcy. Certain obligations may receive different treatment under bankruptcy law, which is another reason an individual review matters.
If credit card debt is the primary reason you’re considering bankruptcy, don’t assume that continuing to make minimum payments indefinitely is your only option.
What Can Disqualify You From Chapter 7 Bankruptcy?
There are circumstances that can affect someone’s ability to receive a Chapter 7 discharge or make Chapter 7 an inappropriate option.
For example, income and the means test can affect eligibility. Previous bankruptcy filings can matter. Certain actions taken before filing may create complications. The details surrounding your debts and financial history can also be important.
That’s why we strongly recommend getting advice before making significant financial moves if you are considering bankruptcy.
Transferring property, repaying certain people, running up credit cards, moving money, or disposing of assets before filing can have consequences you may not anticipate. A bankruptcy attorney can explain what you should (and shouldn’t) do based on your circumstances.
Chapter 7 vs. Chapter 13: What if I Don’t Qualify?
Not qualifying for Chapter 7 doesn’t necessarily mean bankruptcy isn’t an option.
Chapter 7 and Chapter 13 are different forms of consumer bankruptcy, with different eligibility requirements, processes, timelines, and approaches to debt.
Chapter 13 generally involves a court-approved repayment plan over a period of time rather than the Chapter 7 liquidation process. For some individuals and families, Chapter 13 may offer options that Chapter 7 does not.
The important thing is not to decide which chapter you need based solely on something you’ve read online. Start by understanding how each option applies to your financial situation.
How Do I Know if Chapter 7 Is Right for Me?
You don’t need to know whether you qualify before contacting a bankruptcy attorney.
In fact, figuring that out is part of the 15-minute consultation.
Bryan Yaldou has spent more than two decades in the legal profession and today focuses his practice on helping people navigate bankruptcy and overwhelming debt. At The Law Offices of Bryan Yaldou, PLLC, our goal is to make that first conversation straightforward and judgment-free.
We’ll look at your financial circumstances, answer your questions, and help you understand whether Chapter 7, Chapter 13, or another course of action may be appropriate.
Talk to a Downriver Michigan Bankruptcy Attorney
If you live in Brownstown, Downriver, or elsewhere in Southeast Michigan and are wondering whether you qualify for Chapter 7 bankruptcy, don’t let assumptions keep you from getting an answer.
You may qualify even if you’re working. You may have options for protecting property. And if Chapter 7 isn’t appropriate for your situation, there may be other paths worth discussing.
Start with a free 15-minute consultation with bankruptcy attorney Bryan Yaldou. One conversation can help you better understand where you stand and what your next step could be.