New Eligibility Cut Off for Chapter 7

The landscape of bankruptcy is changing, and it can greatly affect your financial future. Starting April 1, 2025, the Office of the U.S. Trustee announced new median income figures that determine eligibility for Chapter 7 bankruptcy. The updated thresholds are now set at $77,420 for a single person with no children and $145,585 for a family of four.

What Does This Mean?

With the adjusted median income figures, new cutoff points are established for filing Chapter 7 bankruptcy. If your income is below these thresholds, you may be eligible for Chapter 7bankruptcy, allowing you to discharge most unsecured debts, like credit card debts and medical bills. If your income surpasses these limits, you might still qualify on the bankruptcy means test, but may need to explore Chapter 13 bankruptcy, which typically requires a repayment plan over five years.

For instance, a person earning $70,000 a year may qualify for Chapter 7, while someone earning $85,000 may not.

Understanding Chapter 7 Bankruptcy

Chapter 7 bankruptcy, offers individuals an opportunity for a fresh start. It enables the cancellation of most unsecured debts.

For example, if a single parent with two kids earns $70,000, they will likely qualify. Conversely, a household of four earning $150,000 may feel the burden of higher income limits that exclude them from Chapter 7 eligibility. You can find our more. here.

Why the Changes Matter

In 2022 alone, approximately 464,000 Americans filed for Chapter 7 bankruptcy. The 2025 numbers are expected to be much higher.

The Importance of Financial Planning

Even if you qualify under the new income limits, it's essential to approach bankruptcy with a solid plan. Consulting a bankruptcy attorney can help demystify the process and provide specialized advice tailored to your situation. They can ensure you understand your rights and responsibilities under the bankruptcy code.