How Much Debt Do I Need to File Chapter 7 Bankruptcy?

If you’re buried in debt and thinking about filing Chapter 7 bankruptcy, you may be wondering if you need to owe a certain amount before you qualify. The truth is, there is no minimum dollar requirement. The U.S. bankruptcy code doesn’t set a threshold for how much debt you must have to file.

In short: any amount of debt can qualify you for Chapter 7 bankruptcy. What matters more is your income, which is the key factor in determining whether you’re eligible.

Determining Eligibility for Chapter 7 Bankruptcy

Although there is no minimum amount of debt needed to be eligible for a Chapter 7 bankruptcy, there are other criteria.

You can file for Chapter 7 only after you meet these qualifications:

• Determining whether you’ll file as an individual or couple.
• Determining that you will not file as a business or corporation.
• You had no debts discharged by bankruptcy in the past 6-8 years.
• You have gone through court-approved credit counseling within the past six months.
• You pass the Chapter 7 means test.

All these qualifications are important, but the means test is a key determining factor.

Chapter 7 Means Test

The higher your income, the less likely you will be to qualify for Chapter 7 bankruptcy (the court may convert it to a Chapter 13). The court determines if you can pay your bills or qualify for Chapter 7 bankruptcy with the Chapter 7 means test, which measures your previous six months’ income against your state’s median. Yours must be less.

The U.S. Bankruptcy Court has a form on its website showing current medians in each state. They vary by state, and amounts rise with family size. For example, in 2025 the median for Washington state was $85,482 for an individual and $145,341 for a family of four. In Wyoming it was $63,412 and $110,604. In Mississippi it was $52,797 and $89,229.

Disposable income is calculated by subtracting monthly expenses (housing, food, medical bills, clothes, etc.) from total income. To prove you qualify, you must complete Bankruptcy Forms 122A-1 and 122A-2.

Form 122A-1

Form 122A-1 establishes your income level. It’s a three-page document that asks for your marital status, gross income (and that of your spouse, if applicable), any alimony or child support income, unemployment and Social Security payments, pensions and retirement investments, such as a 401(k), an IRA or an annuity. Some of that income won’t count against you – for instance, Social Security. Using the U.S. Bankruptcy Court’s latest median income for your state, you calculate whether your income is above or below your state’s median.

Form 122A-2

Form 122A-2 is nine-page form that calculates disposable income, which the court sees as money that’s available to pay debt. You make deductions from your income for housing and utilities, out-of-pocket healthcare payments, food, clothing, and other items. Your household size and any circumstances in your life that “justify additional expenses or adjustments of current monthly income” are also included. You sign and date both forms and include them with your Chapter 7 filing.

Consider Your DTI (Debt-to-Income) Ratio

While no specific amount of debt is needed to file Chapter 7 bankruptcy, your debt-to-income ratio (DTI) does matter. DTI is how much debt you owe in relation compared to your gross monthly income (income before taxes and other deductions). It’s important to understand your debt-to-income ratio when filing for Chapter 7 (or applying for credit or a loan). The higher your DTI, the more likely your Chapter 7 application is to be approved.

A 50% DTI is generally considered high (most lenders cap approvals around 36%-40%). If half of your income is going toward debt payments, it’s a sign that Chapter 7 may be appropriate.

Should You Hire an Attorney If You’re Filing Chapter 7 Bankruptcy?

Filing for bankruptcy includes many documents and deadlines as well as understanding the law and process. Missing a step could mean your case being dismissed, a miscalculation of assets, or other errors.

You aren’t required to hire an attorney, but the U.S. Bankruptcy Court strongly urges it. As the court’s website explains: “Filing personal bankruptcy under Chapter 7 takes careful preparation and understanding of legal issues. Misunderstandings of the law or mistakes in the process can affect your rights.” Court staff cannot give legal advice, and filers are expected to understand the code and procedure.

The cost of an attorney averages $1,500–$3,000, but successful discharge of your debt typically outweighs the expense.

Benefits of Chapter 7

Chapter 7 bankruptcy allows you to eliminate your unsecured debt, no matter how much you owe. It’s different from debt settlement or other debt relief solutions in that you’re not shrinking the amount you owe, lowering payments or stretching them out, but actually wiping away unsecured debt.

Unsecured debt is any debt that isn’t “secured” by collateral, so it includes credit cards, medical debt, payday loans and even things like past-due rent and utility bills. Secured debt – a mortgage or auto loan, for example – has property attached to it that can be reclaimed by the lender if you don’t make payments. The lender is the actual owner of the asset that secures the debt until it’s fully paid.

Benefits of filing Chapter 7 include:

• You don’t have to agree to a repayment plan
• All of your qualifying debt obligations go away
• Debt collection ends.

Under the right circumstances, you get to keep many of your assets, including your house and vehicle, with Chapter 7 bankruptcy. Once the bankruptcy goes through, debt collection is over, which means debt collector harassment ends.

A bankruptcy trustee sells your non-exempt assets and uses the proceeds to pay creditors. Exempt property often includes your primary home, a vehicle, household items, work tools, clothing, and retirement accounts. Non-exempt assets may include jewelry, collectibles, investment accounts, vacation homes, and recreational vehicles.

Chapter 7 bankruptcy covers “dischargeable debt,” including:

• Credit card debt
• Medical debt
• Car loans
• Personal loans
• Payday loans
• Utility bills
• Judgments from debt collection agencies
• Judgments on credit card debt
• Any other unsecured debts

Once Chapter 7 bankruptcy is final, you’ll receive a discharge of debt from the court. This is your official notice that you’re no longer legally obligated to pay the debts included in your case.

» Learn More: Pros and Cons of Chapter 7 Bankruptcy

Which Debts Can’t Be Discharged in Chapter 7 Bankruptcy?

Chapter 7 bankruptcy won’t erase all of your debts. There are categories of debt that the courts have decided must be paid, regardless.

Debts that Chapter 7 won’t eliminate are “non-dischargeable debts.” They include:

• Child support
• Alimony
• Most tax debt
• Most student loans (unless undue hardship can be shown)
• Other secured debts

If student loans are overwhelming, you may file an “adversary proceeding” to argue undue hardship – meaning repayment prevents you from maintaining a minimal standard of living, your situation is unlikely to change, and you made a good-faith effort to pay before filing.

The IRS also offers payment plans and, in rare cases, an “offer in compromise,” which allows you to settle for less than owed. This process is separate from bankruptcy.

If your non-dischargeable obligations are your main financial burden, alternatives to bankruptcy may make more sense.

Alternatives to Chapter 7 Bankruptcy

Bankruptcy is a serious financial decision with long-lasting consequences. It becomes part of your personal financial history.  A Chapter 7 bankruptcy stays on your credit report for 10 years and will severely affect your ability to get credit, loans and make major purchases. If you having major financial problems, Chapter 7 bankruptcy should be a last resort.

Some downsides of Chapter 7 bankruptcy:

• It stays on your credit report for 10 years.
• You could lose most of your personal property.
• Secured debts aren’t discharged.
• You can’t file for another bankruptcy for at least eight years.

There are almost always alternatives to bankruptcy, no matter how deep your debt.

Some alternatives to filing Chapter 7 bankruptcy are:

Debt Management Plan: Only offered by nonprofit credit counseling agencies, debt management combines all of your debts and reduces the interest rate you pay on credit card debt to approximately 8%. It is not a loan, but you do make one monthly payment to the agency. Debt is eliminated in 3-5 years.

Debt Consolidation: All your debt is combined into a single loan that’s easier to manage, because it’s one payment. Consolidating your debt with a loan also means a term that ends, usually in 5-10 years, as opposed to revolving credit, which can go on, accumulating interest, indefinitely.

Debt Settlement: A third party for-profit agency negotiates with your creditors to lower what you owe, and you pay the agency a lump sum. Debt settlement negatives include high fees and a decrease in your credit score, since your credit report, for seven years, will show you settled to pay less than what you owed.

DIY Debt Snowball: A strategy in which you pay off your smallest debts first, then have more money to apply to larger ones. With debt snowball, as each smaller account gets paid off, it makes it easier to pay off the next.

DIY Debt Avalanche: You pay off debt with the highest interest rate first, then use the money you’ve saved to attack the one that’s next-highest. The debt avalanche continues until all debt is paid off.

Chapter 13 Bankruptcy: The personal bankruptcy alternative to Chapter 7 for those whose income is too high to pass the means test.

Before proceeding with a Chapter 7 filing, consider whether a debt management program makes more sense for you. In a debt management program, you can significantly lower the interest rates on your debts, make lower monthly payments that fit your budget, and rebuild your credit and pay off your obligations. Debt management doesn’t show on your credit report, and on-time payments and decreasing what you owe will, over time, improve your credit score. A financial profile that doesn’t include a bankruptcy is definitely better than one that does.

» Learn More: Bankruptcy vs. Debt Settlement

» Learn More: Bankruptcy vs. Debt Consolidation

Chapter 13 Bankruptcy

If you fail the Chapter 7 means test, Chapter 13 bankruptcy may be an option. Known as a wage-earner’s plan, Chapter 13 restructures debt into a 3–5 year repayment plan. At the end, remaining unsecured debt is discharged.

Advantages of Chapter 13 include:

• Saving your home from foreclosure
• Extending repayment over the plan’s length
• Making one monthly payment through a trustee
• Less credit damage than Chapter 7 (report stays for seven years)

Find Out If Chapter 7 Bankruptcy Is Right for You

You may be wondering if you have enough debt to file for Chapter 7 bankruptcy, but how that debt affects your finances and life is the actual question.

Everyone’s financial situation is different, so there are no absolutes. If your credit score is below 600, but you can still squeeze out money for your monthly bills, even if it’s tight, then an alternative is probably a good idea. If you have a lot of expensive property you want to keep, you may also want to find another option to pay off your debt.

Chapter 7 bankruptcy may be right for you if:

• You can’t pay your bills every month, even after cutting expenses.
• You are constantly getting calls from debt collectors, or are facing a court date or wage garnishment because of unpaid debt.
• Your house is in danger of foreclosure or your car is about to be repossessed.
• Your DTI is 50% or more.
• Much of your debt would be dischargeable in a Chapter 7 bankruptcy.
• You don’t see a way to improve your financial situation in the future.

Before you file for Chapter 7 bankruptcy, you are required to attend credit counseling. Pre-bankruptcy credit counseling is a strict regulation of the bankruptcy laws, and you must have a certificate of completion in order to file.

The big benefit to credit counseling is that qualified representatives from a nonprofit credit counseling agency will walk you through all the options and help you determine if Chapter 7 bankruptcy is the best alternative for your situation.