WHAT CHAPTER CAN I FILE?
In theory, anyone can file bankruptcy; however, those filing bankruptcy may only qualify to file certain chapters. In 2005, Congress passed the Bankruptcy Reform Act of 2005, instituting the process called means testing. The purpose of the legislation was to force individuals with high incomes to file for Chapter 13 protection, rather than Chapter 7.
To determine which chapter your situation qualifies for, an examination of your income is undertaken utilizing the means testing parameters.
Chapter 7 Bankruptcy Qualifications
To qualify for Chapter 7 bankruptcy, your income must be below the medium income line of the current year. If it is, you qualify for Chapter 7 protection.
If your income is above the median income, you may still be able to qualify for Chapter 7 bankruptcy protection. Under the means testing model, certain deductions, based on the number of people in the household, may be taken for housing, food, clothing, etc. If these deductions place you under the median income, you will also qualify for Chapter 7 protection.
Chapter 13 Bankruptcy Qualifications
If after deductions, you do not qualify for Chapter 7 protection, you may qualify for Chapter 13 relief.