Can I file for a chapter 7 bankruptcy if I’m working?   Yes.

You may have been out of work for a period of time or have large medical bills that are making it impossible to get caught up financially.

How much you earn and what types of debt you have will determine what bankruptcy chapter you file but most of the time people who need the help of the bankruptcy court will qualify to file. Simply put, if you earn less than the median income for your state you will pass the means test and may file a chapter 7 bankruptcy.

The means test is based on the median state income which you can find on the United States Department of Justice website. It means that if you earn more than the median income amount in your state the presumption of abuse is raised if you file a chapter 7 bankruptcy. If a presumption of abuse is found you may not be able to get a discharge of your debts.

If you earn more than the applicable median income, you may still qualify for a chapter 7 depending on the type of monthly obligations you have to pay.  In that case you will need to calculate a long form of the means test. If after entering secured debts, taxes paid, medical expenses and other qualifying expenses your income is within guidelines then you can file for a chapter 7 bankruptcy.

Some expenses that factor into the long form of the means test are:

  • Auto payments
  • Mortgage payments
  • Income tax payments
  • Property tax payments
  • Term life insurance costs
  • Health insurance costs
  • Charitable contributions
  • Child care necessary for work
  • Education costs
  • Healthcare costs
  • Union dues
  • Mandatory retirement

Even if you qualify to file a chapter 7 there may be reasons why it would be in your best interests to file a chapter 13. If you have an underwater house, owe homeowners’ association dues, owe incomes taxes or obligations arising from a marital dissolution, filing a chapter 13 bankruptcy might be to your benefit. If you have assets that can’t be exempted and would be subject to sale by a chapter 7 trustee, you might want to file a chapter 13 instead. It is a complex, fact specific determination, so consult with a knowledgeable local bankruptcy attorney to determine the best strategy to meet your goals.