How much do you have to be in debt to file Chapter 7?

Eligibility criteria for Chapter 7

While there is no minimum debt requirement to file for bankruptcy, there are other criteria you must meet to be eligible for Chapter 7 bankruptcy:

• You haven’t received a Chapter 7 bankruptcy discharge in the last eight years.
• You must have attended court-approved credit counseling within the last 180 days (six months).
• You must pass a “means test.”

The Chapter 7 “means test”

If you make more money than the average person in your state, you must take a "means test" to see if you really need bankruptcy help. This is done by filling out Form 122A-1 and Form 122A-2 with details about your income, tax filing status and debt obligations.

The court will review your income and financial situation to determine eligibility. If, after paying for basic needs and required debts, you still have enough money left over to pay back a part of your debts (at least $9,075 or 25% of what you owe, whichever is bigger, or at least $15,150), the system assumes you might not qualify for Chapter 7.

However, you may still be able to file if you can show “special circumstances that justify additional expenses or adjustments of current monthly income,” according to the U.S. bankruptcy law.

Is Chapter 7 bankruptcy worth it?

Bankruptcy hurts our finances — period. Not only can it wreck your credit score, but you might lose some assets as part of the proceeding. And going forward, borrowing money for things like a car or a home will be very difficult.

If you’re in debt and considering Chapter 7 bankruptcy, here are a few things to think about before filing: your ability to repay debts, what assets you might lose, the overall costs and the long-term impact on your credit score.

Consider your debt-to-income ratio

Bankruptcy can sometimes drop your credit score by over 200 points.

If you’re on the fence about filing bankruptcy, you probably have a high debt-to-income ratio. This ratio compares your debt monthly payments to your total monthly income. More important than your total debt balances is how much money you make and whether you can pay down debts within a reasonable period of time. If a significant portion of your paycheck is going toward debt payments, this can be a good reason to consider Chapter 7 bankruptcy.

You might be liquidated

The court can seize some of your assets to help pay down the debts you owe before discharging the remaining balances. This means you might lose your antique car, valuable jewelry or even your Pokemon collection. And while you can’t lose your primary home, the court may be able to seize your vacation home or rental home.

In other words, if you have significant assets that may get liquidated, it may not be worth filing for Chapter 7 bankruptcy.

» MORE: What happens after an automatic stay is lifted?

Bankruptcy is expensive

Bankruptcy isn’t something you can usually file yourself. You need to hire lawyers to help you through the process. This process can be expensive, often costing thousands of dollars, which may be difficult to afford. You need to analyze the total cost of filing bankruptcy to ensure it’s worth the outcome.

Financial damage to loan co-signers or co-borrowers

If you have co-signers or co-borrowers on any of your loans, filing for Chapter 7 bankruptcy can put the burden of debt payoff squarely on them. Because they signed up as a co-signer on your loan, they are financially liable for the debt payments. If you file for Chapter 7 bankruptcy, your loan co-signer or co-borrower becomes fully responsible for the loan balance.

Impact on your financial future

Before choosing to file bankruptcy — just know that your credit score will be impacted in a huge way. In most cases, your score will drop by over 100 points (sometimes over 200 points), and the bankruptcy will be on your credit report for seven to 10 years. This can have a massive impact on your ability to borrow money, qualify for a credit card or advance your career. Some employers conduct credit checks before hiring, and a bankruptcy on your record could impact job opportunities.

You’ll get a fresh start

There are downsides and risks to Chapter 7 bankruptcy. But the process is designed to help you get a fresh start with your finances. You will no longer have credit card debt, payday loans or other high-interest unsecured debts that stopped you from being able to pay your bills and save money. Yes, it takes time — but you can rebuild your financial foundation after bankruptcy.

» STATISTICS: Average American debt in 2025

Alternatives to Chapter 7 bankruptcy

Chapter 7 bankruptcy isn’t the only answer to your financial problems. There are many other ways to handle outstanding debts that can save money and protect your financial future. Here are a few Chapter 7 bankruptcy alternatives to consider:

Chapter 13 bankruptcy

Chapter 13 is another type of bankruptcy known as the “wage earners” plan. This can be a good option if you fail the “means test” for Chapter 7 bankruptcy or need to save your home from foreclosure. It’s designed to help you come up with a proposed payment plan to pay down all or part of your owed debts. The idea is to make on-time payments to a trustee, who then distributes your money to your creditors. After the payment plan ends, whatever debt is remaining is discharged.

» MORE: Is filing Chapter 13 worth it?

Debt management plan

Debt relief companies can help you save money and lower your monthly payments. The downside is that they often charge high fees. You can also work with a nonprofit credit counseling agency to help come up with a debt management plan that makes sense.

With a debt management plan, you work with a third party that negotiates a structured repayment plan with your creditors. You then send a single payment to the debt management company, which pays creditors on your behalf.

Debt consolidation

You may be able to consolidate your debts to lower your monthly payments and interest rates. A debt consolidation loan allows you to pay off multiple existing debts with the loan proceeds — effectively consolidating your debts into a single monthly payment. If your loan has lower rates than your existing debts and a longer repayment term, it can also lower your monthly payments.

» MORE: Debt settlement vs. bankruptcy