How much income is too much for a Chapter 7 bankruptcy?

Filing for bankruptcy is never an easy decision, but for borrowers who are facing rapidly mounting debt, it can feel like the only way to get a fresh start. And, that's especially true right now. Between today's high credit card balances, rising living costs and still-elevated interest rates, millions of households are feeling the financial squeeze. As a result, personal bankruptcy inquiries are climbing, a clear indicator that borrowers are struggling to keep up with their debt obligations. 

But while Chapter 7 bankruptcy can wipe out many unsecured debts entirely, not everyone qualifies to take that route. That's because this type of bankruptcy is designed for people who truly can't afford to repay their debts. As such, your income, along with your household size and living expenses, plays a central role in determining whether you're eligible. If you make too much, you may be steered toward Chapter 13 bankruptcy instead, which requires you to repay a portion of what you owe through a structured plan.

But figuring out what counts as too much isn't as simple as checking a chart. The income limits vary, and several factors beyond your paycheck come into play. Below, we'll examine how the income test for Chapter 7 bankruptcy works and what you can do if your earnings put you over the threshold.

Start taking back control of your high-rate debt today.

How much income is too much for a Chapter 7 bankruptcy?

When it comes to the question of how much is too much income for Chapter 7, the answer depends on your state's median income for a household of your size. If your current monthly income is below your state's median, you generally pass the means test automatically and can file for Chapter 7 bankruptcy. If you're above the median, though, you'll need to complete a more detailed calculation that factors in your actual expenses.

Here's how it works. The means test starts by looking at your average monthly income over the past six months. This includes wages, bonuses, rental income and other sources, but excludes any Social Security benefits you may receive. This figure gets multiplied by 12 to create your current monthly income for the year. That number is then compared to your state's median income for your household size.

For 2025, median incomes vary dramatically by location. A single person in Alabama, for example, has a median income of around $60,786, while in California it's closer to $76,190. For a family of four in Texas, the median income sits around $110,719, while the median income in Connecticut is approximately $159,767. These figures are updated periodically, so it's important to check the current numbers for your specific state.

If you're above your state's median, it's important to understand that you're not automatically disqualified from filing for bankruptcy. You'll simply move to the second part of the means test, which subtracts allowed expenses from your income. These include things like mortgage or rent payments, vehicle payments, taxes, health insurance and certain living expenses based on IRS standards. If, after deducting these expenses, you have limited disposable income left over, you can typically still qualify for Chapter 7.

Explore your debt relief options and find the right strategy for you now.

What to do if you don't qualify for Chapter 7 bankruptcy

If your income is too high to pass the means test, you still have options. While Chapter 13 bankruptcy may be one route, there are other debt relief solutions you can use to get control of your finances, often with fewer long-term consequences.

Debt settlement programs, for example, are designed for those struggling with unsecured debts like credit cards, medical bills or personal loans. With this approach, a debt relief company negotiates directly with your creditors to try and settle the debt for less than what you owe. This can, in many cases, reduce your balances by 30% to 50%, making it a lot easier to pay off what's owed.

And, unlike bankruptcy, debt settlement doesn't require court proceedings or public filings, and you get to keep your assets. It can also be faster. Many people see their first settlements within a few months and complete the program in a few years. So, for those who don't qualify for Chapter 7 and don't want the extended repayment plan of Chapter 13, this can be a practical middle ground.

Another potential option is working with a credit counseling agency on a debt management plan. When you have a debt management plan in place, the credit counselor will work to help you consolidate your unsecured debts into one payment, often with reduced interest rates and fees. While you'll still pay your debts in full over time, the lower rates and simplified repayment structure can make it easier to stay on track and avoid bankruptcy altogether.

Both debt settlement and debt management can also be stepping stones toward rebuilding your credit. While bankruptcy can remain on your credit report for up to 10 years, completing a debt relief program can help demonstrate financial responsibility much sooner.

If you're not sure which path makes sense, it's probably worth talking to a reputable debt relief provider. Many offer free consultations that can help you understand your options and determine whether a bankruptcy alternative might actually save you more money in the long run.

The bottom line

There's no single income limit that automatically disqualifies you from Chapter 7 bankruptcy. It ultimately depends on your household size, location and allowable expenses. But even if your income exceeds your state's median, you may still have options for relief from your high-rate debt.

Bankruptcy also comes with lasting financial consequences, so if you don't qualify or are looking for a way to resolve your debts without filing, exploring alternatives like debt settlement or debt management could be a smart move. These programs can help reduce what you owe, consolidate your payments, and start you on the path toward financial stability without the long-term impact of bankruptcy.